Labor posts $10b budget deficit despite spending boost
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The news: Treasurer Jim Chalmers and Finance Minister Katy Gallagher will on Monday release the Final Budget Outcome for 2024-25 which will show the 2024-25 budget deficit at $10 billion, an improvement on $27.9 billion originally forecast.
The numbers: The budget will show an underlying cash deficit of just under $10 billion (0.4% of GDP), lower than the forecast deficit of $27.9 billion in the 2025 pre-election economic and fiscal outlook (PEFO) and $47.1 billion in the 2022 PEFO.
A statement from the Treasury says that Labor’s three Final Budget Outcomes have delivered a cumulative underlying cash balance of +$28 billion, compared with the more than -$181 billion it inherited.
The fiscal position means gross debt in 2024–25 was $188 billion lower than the inherited debt, avoiding over $60 billion in interest costs over the 11 years to 2032–33, Labor will say. The Treasury will add that when the party came to office, gross debt was forecast to peak at 44.9% of GDP, at the 2025 PEFO it was forecast to peak much lower than that at around 37% of GDP.
Average real spending growth is 1.7% per year over the seven years to 2028-29, compared to the previous Liberal government which averaged 4.1%.
Gross debt in 2024-25 came in $200 billion lower than forecasts at the time of the 2022 election.
The context: In July, Chalmers flagged that the deficit would come in “in the low double digits,” on greater-than-expected tax collection from workers and businesses.
The deficit — which follows the back-to-back surpluses Labor produced in its first two years in government — is still unlikely to lead to surpluses in the coming years with the budget in structural deficit amid spiralling costs in defence, aged care and health.
What they said: “We’ve turned two big Liberal deficits into two substantial Labor surpluses in our first two years, significantly reduced the deficit in our third year, and continued to pay down debt,” Chalmers said in a written statement.
“Today’s figures show that the deficit in our third year is around a fifth of the forecast we inherited from the Coalition, and around a third of the forecast before the election earlier this year. The budget is in much better nick because we’ve paid down almost $200 billion of Liberal debt, demonstrated spending restraint, overseen the creation of more than 1.1 million jobs and got real wages growing again.”
Gallagher added: “A key reason for the better revenue result is that more Australians are in secure jobs, earning higher wages. At the same time as revenue has strengthened, we’ve delivered cost-of-living relief, tax cuts for every taxpayer, cheaper childcare, energy bill relief and record investments in Medicare.”
The source: Treasury statement
