Off the back of surging company and personal taxes, the size of Australia’s budget surplus is expected to exceed previous expectations from May. With the underlying cash balance expected to reach $19bn, almost $15bn above the initial projection, this can be owed to strong commodity prices, allowing mining profits to drastically increase. Further, with tight labour market conditions and increasing wage growth, personal income tax collections have also been strengthened. Thus, this will assist the economy in addressing the ‘inflation challenge’ and ‘rebuild fiscal buffers’ as stated by finance minister, Katy Gallagher.
However, Australia must proceed with caution as this increased taxation revenue is synonymous with increased leakages from the economy. With treasurer Jim Chalmers predicting the economy could dip to 1.5% in 2023/24 from 3.25% this year, this only heightens risks of a contraction or even a recession. This is only further reinforced by Chalmers’ warnings that the RBA may further tighten interest rates to address high inflationary pressures ahead of the new inflation statistics release this Wednesday.
Moreover, political tensions boil as Shadow Treasurer, Angus Taylor, claims anybody could have delivered a budget surplus this year, with the real challenge for Labor being to sustain surpluses in the long term.