The final budget outcome for the 2022/23 financial year has recently been released. The final budget outcome has beaten the official estimate provided in the May 2023 budget by $17.9bn, to print a surplus of $22.1bn.
The improved budget outcome was driven by both lower than anticipated expenditure, and higher than anticipated revenues. Expenditure came short of the May Budget forecast by $4.0bn due to lower demand for some services/programs and delays in some payments (likely to be paid in the 2023/24 financial year). Revenues exceeded May Budget expectations by $13.9bn and the outperformance was driven almost entirely by a $12.7bn uptick in company taxes from estimates.
2023/2024 Outlook
The May 2023 Budget forecasts that the budget will revert to deficit in the 2023/24 financial year. However, Westpac economists (Bill Evans Andrew Hanlan) believe that the current government policies could potentially return a surplus in the 2023/24 financial year.
There appears to be consensus that the budget will be in deficit in the 2024/25 financial year.
Significance of this Surplus
The last budget surplus delivered was in 2007/08 and was driven by the proceeds from the mining boom prior to the GFC. The 2007/08 surplus was 1.7% of GDP, while the 2022/23 surplus was half that, at 0.9% of GDP.
Revenue Share to GDP
While government revenue came in higher than expected, nominal GDP growth did not meet expectations for the period, coming in at 9.7% for 2022/23. These factors lead to a government revenue share of 25.7% over the period, which is the third highest recorded percentage in the last fifty years. Importantly, tax receipts equalled 23.8% of 2022/23 GDP, and represents the vast majority of revenue collections, with non-tax receipts equalling 1.9% of GDP.
Government Debt
Gross debt on 30 June 2023 was $2.8bn higher than expectations at $889.8bn. This figure represents 35.2% of GDP, which is down from 38.8% in 2021/22 and down from the peak in 2020/21 of 39.3%.
Interest paid on the debt as a share of the economy continued its downward trend from 0.8% in 2021/22 to 0.7% in 2022/23. This figure represents the lowest share of the economy in the last 11 years, since 2011/12.
Source: Westpac
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