EXPORTS, JOBS LIFT BUDGET INTO SURPLUS
Export markets, job growth spur one-off budget surplus
Surging commodity prices and continued low unemployment have contributed to the Federal Budget producing a surplus for the first time in 15 years. Treasurer Jim Chalmers reported that the Federal Government would deliver a $4.2 billion budget surplus in the current 2022-23 financial year – a major turnaround on the $36.9 billion deficit forecast in October. But the Budget Papers predict it will be the last surplus for a while, with a budget deficit returning in 2023-24, at $13.9 billion and rising to $36.6 billion by 2025-26. The Treasurer forecast that inflation would subside to 3.25 per cent in 2023-24, and fall again to reach the Reserve Bank’s target range of 2-3 per cent in 2024-25.
Rising debt, slowing economy cloud medium-term budget outlook
Treasurer Jim Chalmers has forecast a tapering in export growth from eight per cent in 2022-23 to six per cent under a scenario of lower global economic growth. The Treasurer said that Australia’s real gross domestic product (GDP) growth would fall from 3.25 per cent this current financial year to 1.5 per cent in 2023-24. Dr Chalmers acknowledged that achieving a budget surplus in 2022-23 would reduce interest costs on annual borrowings, but challenges remained in meeting the demands of rising costs in defence, health, aged care and the National Disability Insurance Scheme. Increased defence commitments will push defence spending to 2.3 per cent of GDP by 2032-33. The Budget Papers forecast that net interest payments would rise from $12.7 billion (0.5 per cent of GDP) in 2022-23 to peak at $21.3 billion (0.8 per cent of GDP) in 2025-26.
$2.4 billion tax hike on offshore gas sector
Ahead of the Federal Budget, the Albanese Government announced changes to the Petroleum Resource Rent Tax (PRRT) lifting the taxation take on the offshore liquefied natural gas (LNG) industry. Under the changes, the use of deductions on caps will apply from 1 July, limiting the proportion of PRRT assessable income that can be offset by deductions to 90 per cent. Treasurer Jim Chalmers said the reforms would bring forward PRRT revenue from LNG projects, adding an expected $2.4 billion to tax receipts over the four-year forward estimates.
Trade surpluses pave way for budget lift
Australia’s improved budget position in 2022-23 has been driven by the nation’s export performance, with a healthy trade surplus again reported for March. The Australian Bureau of Statistics revealed a seasonally adjusted trade surplus of $15.27 billion in March, thanks to a 20 per cent increase in exports of iron ore and coal. While monthly imports rose $1 billion in March, exports increased by $2.1 billion. Through 2022-23, monthly trade surpluses have not fallen below $8.4 billion, which was recorded in July 2022.
Superannuation to be paid on pay day
Employers will be required to pay their employees’ superannuation contributions on payday, under changes proposed by the Federal Government. Treasurer Jim Chalmers said that from July 1, 2026, superannuation would be paid at the same time as salary and wages, making it easier for employees to keep track of their payments. Superannuation contributions are generally paid per quarter. Dr Chalmers said that while most employers did the right thing, the Australian Taxation Office had estimated that $3.4 billion worth of superannuation went unpaid in 2019-20.
US maintains strong lead in two-way investment
The United States remains the biggest foreign investor in Australia, and the largest site for Australian offshore investment, according to latest figures. Foreign investment in Australia in 2022 rose $432.9 billion, to $4,598 billion, while Australian investment abroad rose $351 billion to $3,742 billion, in figures released by the ABS. During 2022, the US held almost $1,100 billion in Australian investments, closely followed by the UK, then the European Union and Japan. Portfolio investments in debt and equity made up more than $2,178 billion of foreign investment in Australia. For the second year in a row, Australian investment in the US surpassed the $1,000 billion mark.