SURPLUS KICKS, BUT EXPORT FALLS TIPPED

Budget surplus surging to end of 2022-23

Six weeks after the May Budget, the Federal Government has reported another surge in the budget surplus, thanks to higher corporate taxation and lower payments. Latest figures from the Department of Finance reveal that the budget surplus to the end of May was $19 billion - $11.5 billion ahead of the expected $7.5 billion forecast for the first 11 months of 2022-23. Revenue was $8.5 billion higher and payments $3 billion lower than budget estimates, with low unemployment contributing to lower welfare payments. Final financial year spending commitments will determine the final budget outcome, but it will still represent a major turnaround on the $36.9 billion budget deficit originally forecast by the Albanese Government at its first budget in October last year.

Bearish outlook on export commodity revenue

As Australia’s budget and economy profits from strong demand for export commodities, a major Federal Government report is forecasting a significant fall in energy and resources revenue over the next two years. The Department of Industry, Science and Resources has tipped the annual value of commodity exports to drop by 25 per cent, from an estimated record of $460 billion in 2022-23 to $344 billion in 2024-25. According to the latest Resources and Energy Quarterly, Australia will experience major falls in the export revenue of liquefied natural gas (LNG) and coal, with thermal coal revenue forecast to plunge by more than 50 per cent, from $64 billion in 2022-23 to $30 billion in 2024-25. Iron ore export revenue is predicted to drop from $123 billion to $93 billion over the two-year period. The bearish forecasts will feed expectations of a declining budget surplus in coming years.

Inflation edges down in May

Monthly figures from the Australian Bureau of Statistics have provider a glimmer of hope that annual inflation is edging down, albeit slowly. In May, the Consumer Price Index indicator rose 5.6 per cent over the previous 12 months, down from the 6.8 per cent CPI indicator recorded in the year to April. An eight per cent drop in the price of automotive fuel contributed to the fall, but housing-related costs continued to rise sharply for the 12 months, including electricity (14.1 per cent), while insurance rose 14.2 per cent.

Underemployed workers seeking more hours as retrenchments tumble

While Australia battles with worker shortages, a major survey of underemployed workers has found that almost half of them would prefer to work on a full-time basis. The ABS survey conducted in February found that almost 800,000 part-time workers were underemployed (available to work more hours). Half of the underemployed part-time workers preferred to work an extra 10 hours or less, with females aged 15-44 and males aged 15-24 the most likely to be underemployed. Meanwhile, the ABS also reported that the rate of job retrenchments in the year to February was 1.4 per cent, the lowest on record in Australia. Job mobility was 9.5 per cent, the highest rate in a decade, with 1.3 million people changing jobs, and the highest rate of job switching among professionals.

Defence review changing risk factors, says PM

Prime Minister Anthony Albanese says the Defence Strategic Review is changing the “risk factors” in defending Australia, especially through the nuclear submarine program. The Prime Minister told a business forum that an “undetectable submarine” being able to be operated in Australia was an investment that would lead to less need in other areas. While the government would strengthen the defence presence in the north of the country, the PM said he did not think “Charleville or Mt Isa” would need to be defended “in our lifetime”. Mr Albanese said that in this century, the greater threats were posed to submarine cables, trade routes and cybersecurity, rather than by a land force in the country.

Major defence agencies now in force

Two major defence bodies that emanated from the Defence Strategic Review have officially come into operation at the start of the 2023-24 financial year. Working with industry and academia, the Advanced Strategic Capabilities Accelerator (ASCA) is charged with delivering advanced technologies to the Australian Defence Force, at a four-year cost of $748 million, and $3.4 billion over 10 years. Meanwhile, the Australian Submarine Agency came into force on July 1, with the responsibility of the management and oversight of the nuclear-powered submarine program. Based in Canberra, Vice Admiral Jonathan Mead will serve as the inaugural Director-General, in charge of an initial staff of more than 350, rising to an expected 680 next year.