Josh Frydenberg will show a recovery in fiscal revenues but more deficits
The strength of the job market and rising wage expectations will push expected income tax receipts past $260 billion for the first time on record.
Oil resource rent tax collections are expected to reach nearly $3 billion, double what was projected in last year’s budget, due to the surge in oil prices.
Prime Minister Scott Morrison said on Monday that the strengthening economy was helping to reduce the overall level of debt.
“It’s this stronger economy, which allows you to pay down the debt when you combine that with responsible fiscal management, which our government demonstrated before the pandemic hit, we had restored fiscal balance,” a- he declared.
Despite the extra revenue, government spending is rising as it seeks re-election and makes long-term commitments in areas ranging from defense to elderly care.
This has raised concerns within some parts of the Coalition, upset at how the new spending plans are not offset by spending cuts in other parts of the budget.
By November 2024, the government will have to refinance more than $160 billion in debt. All of this will have to be repaid with more debt at interest rates between two and three times higher than when the original sale was made.
Shadow Treasurer Jim Chalmers said the government had pledged more than $70 billion in additional spending since the mid-year update. This includes $38 billion to increase the size of the defense force as well as new road projects in key marginal seats across NSW and Victoria.
“This Prime Minister only holds a pipe if he sprays borrowed money on the eve of an election. What this tells us is this: the budget will not be a plan for the future, it will be a plan for the re-election of Scott Morrison,” he said.
It’s not just the government promising new spending initiatives, Labor leader Anthony Albanese is expected to use his budget speech in response on Thursday night to make new pledges to voters.
Jacqueline Maley cuts through the noise of the federal election campaign with news, opinion and expert analysis. Sign up for our Australia Votes 2022 newsletter here.