Budget update ‘within days’ as PM prepares to call election

Loading

In 2007, then-treasurer Peter Costello pulled forward the mid-year budget update by almost two months. Containing $35 billion in personal income tax cuts, the update was released the day after John Howard had announced that year’s election date.

Six years later, then-treasurer Chris Bowen released an economic statement three months after Wayne Swan’s May 2013 budget. The update revealed a $33 billion deterioration in the budget bottom line plus tax changes, including a planned overhaul of novated leases that prompted an angry backlash from those affected by the changes.

Under the Charter of Budget Honesty, the Treasury and Finance Departments must release their own pre-election economic and fiscal outlook (PEFO) within 10 days of the writs for an election being called.

This document, unlike budgets or mid-year updates, is completely controlled by apolitical public servants, presenting a risk it could contain figures uncomfortable for a government. In both 2007 and 2013 there was little difference between the budget update and the PEFO.

As recently as Wednesday, Treasury secretary Steven Kennedy said the department was working towards a March 25 budget. But under questioning from Liberal senator Andrew Bragg, Kennedy said turning a budget into an economic statement would be a “decision for the government”.

In a sign of the uncertainty about Albanese’s election plans, going to the election without an economic update and relying on a PEFO is still an option open to the government.

In his mid-year budget update, released in December, Chalmers forecast unemployment to reach 4.5 per cent this year and next, with inflation to be 2.75 per cent over the same period.

Since then, inflation pressures have eased more than expected. It was one of the reasons the Reserve Bank cut official interest rates by a quarter percentage point earlier this month, which many households will begin to see in mortgage repayments from Friday, February 28.

Unemployment has also been lower than expected. The Reserve Bank now expects unemployment to average 4.2 per cent over the next two years.

Loading

Finance Department figures released on Friday suggest the budget is improving due to the ongoing strength of the jobs market, commodity prices and superannuation sector.

In the seven months to the end of January, the budget was $3.6 billion better than had been expected. Personal income tax collections were $600 million stronger than anticipated, company tax was up by $2.5 billion, and superannuation taxes were $500 million above forecasts.

While revenue is up, government spending is almost $2 billion lower than had been expected.

Despite the improvement, the figures point to Albanese going to an election overseeing a sizeable budget deficit. In December, Chalmers forecast a deficit of $26.9 billion for the 2024-25 financial year and a $46.9 billion shortfall in 2025-26.

This year’s deficit follows back-to-back surpluses, the first since 2007-08.

The Treasurer’s office was contacted for comment.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.