But the deficit is expected to grow, reaching $42.8 billion in 2025-26. If that forecast proves accurate, it would be among the 10 largest deficits on record.
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The Coalition has ramped up attacks on the government, claiming extra government spending has contributed to the Reserve Bank’s increase in official interest rates since May 2022.
In May, Chalmers forecast total government spending in 2023-24 of $683 billion with that expected to increase to $726.7 billion in the current financial year. The single largest expense is forecast to be the GST at $91.6 billion, followed by the age pension ($58.9 billion), the NDIS ($42.9 billion) and aged care services ($32.3 billion).
Chalmers and Gallagher will also reveal total revenue will be lower than forecast in May when it was predicted to reach a record $692.3 billion. Of that, tax receipts were forecast to hit $638.8 billion or 23.8 per cent of GDP, the highest share of the economy since 2005-06.
Most of the slide in tax has been from companies as total employment has risen by more than 120,000 since the budget and wages growth has been around 4 per cent.
When the 2023-24 budget outcome was first forecast in 2020-21, then treasurer Josh Frydenberg tipped a deficit of $66.9 billion and that gross government debt would be at a record high of more than $1.1 trillion.
Chalmers will reveal gross debt at $906.9 billion, with a $4 billion saving in interest costs in 2023-24 and $80 billion over the coming decade. Since the start of the new financial year, however, gross debt has climbed and on Friday reached a record $933.1 billion. It is expected to stabilise around that level for the rest of the year.
The treasurer at the weekend returned from a trip to China, Australia’s largest trading partner, which is going through its most sustained economic slowdown this century.
Chalmers said that the price for iron ore was now at “quite low” levels, falling by 40 per cent since the start of the year, while prices for thermal coal had come down to a similar level.
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He said this would have implications not just for the Australian economy but also for global activity.
Last week, the Reserve Bank used its six-monthly report into the financial system to note there were “imbalances” in China’s financial sector that were being exacerbated by its troubled real estate sector.
“A further loss of confidence – absent a timely and significant response from the Chinese authorities – could see stress spill over to the rest of the Chinese economy and financial system, which would likely affect Australia and the rest of the world through trade and risk-aversion channels,” it said.
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