Jim Chalmers had overseen back to back surpluses, but those days are over the Treasurer said tonight, as he announced the budget would be in deficit by $26.9 billion this year and remain that way for the foreseeable future. 

Any chance of a surprise surplus, of the type provided by booming minerals exports over the past two years, was removed by the $1.2 billion cost of ex-Tropical Cyclone Alfred, denting the economy’s gross domestic product in the three-month lead into the budget by 0.25 percentage points.

But a return to deficit came as no surprise to economists, as the budget had been in “structural deficit” for the better part of 20 years. 

Industry figures put it down to to falling commodity prices, weaker economic growth, and higher government spending on areas such as the NDIS, aged care, health and defence spending. 

Dale Boccabella, Associate Professor of accounting, auditing and taxation at UNSW, said fiscal discipline would be crucial to ensure the Australian economy can respond to future economic shocks. 

“We can’t go on this building up our debt levels,” he told Central News. “What that does is build debt for future generations, young people have to be lumbered with paying that off.

“The world is in a strange place right now, we might have to spike our defence spending. Where are we going to get that from?” 

Without the fiscal space, the government has limited flexibility to implement targeted financial aid or social welfare programs which alleviate the pressure on Australians.  

The reality is that we’re being charged, the government is being charged, excessively, for these outside services.

Boccabella suggested Australia’s tax system could be the solution to the deficit. 

“We could fix up some of those gaping holes, and they are worth billions and billions and billions – they are a massive source of unfairness,” he said. “We could actually work on those over time, which would really help us on the revenue side.

“There are a lot of parts of our income tax system that, are basically laughable. They are so unfair in our income tax system, completely unfair. They should never have been allowed to get in place. But the reality is the politics. 

“It’s become a bit of a laughing stock, but everybody knows as soon as one side actually attacks it, and wins it back a bit to a more fair situation, the other side’s gonna grab the opportunity to win votes. It’s appalling. It just goes on and on and on.” 

However, Bocabella said there was light at the end of the tunnel, with Labor announcing $2 billion of savings ahead of tonight’s federal budget, with cuts on consultants, contractors and labour-hire to help relieve the debt. 

“Those consultants, that were on the books all those years being paid ridiculous sums instead of having employees of the government, public servants… the waste there is just phenomenal,” he added.

“The current government’s response is that we have got to be a bit more careful here.

“The reality is that we’re being charged, the government is being charged, excessively, for these outside services. You bring them inside and the cost goes down.”

Main image composite of GenCraft AI and Canva by Central News.