The Federal Government has announced a bumper budget surplus ahead of schedule, with some of it likely to be splashed on voters ahead of next year’s election.
The long-anticipated return to budget surplus has almost doubled from a projected $2.2 billion to $4.1 billion in 2019/20.
Over the next four years, that is expected to amount to more than $30 billion, with the figures announced at the Mid-Year Economic and Fiscal Outlook (MYEFO) on Monday.
“As a result of the strong economy and the government’s sound fiscal management, the budget is set to return to a surplus in 2019/2020 after a decade of deficits,” Treasurer Josh Frydenberg said.
“We are doing all of this without raising taxes. There is more to be done but this update shows that our plan is working,” he added.
The welcome result was produced by a range of factors including significant spending cuts, higher company tax revenues, and a strong labour market, according to a NAB senior economist.
“Certainly the economy so far has been very kind to the budget. The commodity price story and even as we speak today, coal and iron prices are travelling much better than expected,” David de Garris told Business Breakfast.
“Mining company earnings, and even earnings generally [in] the non-mining economy have been doing better,” he added.
However, with a federal election looming next year, the government is expected to play politics with the numbers, according to Dixon Advisory’s managing director and head of advice.
“I think that they’ll probably keep some of these estimates conservative and potentially give themselves a little bit of firepower coming into what will now be an April budget in 2019 and make some more announcements there,” Nerida Cole said ahead of MYEFO.
There have already been some ‘”leaks” to what the Coalition may announce off the back of the growing surplus, according to Cole.
“We heard that there are over $500 million dollars going towards aged care funding which is a really contentious area in the federal budget in May,” Cole explained.
“The other one we’ve heard about is some reforms around redundancy payouts for [people] over 65 years old. At the moment they don’t get tax concessions if they are made redundant,” she said.
“[These are] some areas there which potentially are causing a little bit of pain but also measures that will be popular in the electorate.”
Watch the full interviews above.