Jim Chalmers Confirms Federal Budget Deficit for Next Week

Treasurer Jim Chalmers has officially confirmed that the short-lived era of budget surpluses is over, with next week’s federal budget set to be in deficit.

For months, it had been expected that Australia would return to the red, but with a weaker Australian dollar boosting mineral exports, there was some hope that Chalmers might be able to squeeze out one more surplus. Now, he’s made it clear: that’s not happening.

"A defining feature of our first three budgets was responsible economic management. That will be a defining feature of the fourth as well," Chalmers said on Monday.

He also pointed out that while this budget will be in deficit, the gap will be “much, much smaller” than what was inherited from the previous government.

Why the Surplus Disappeared

Labor managed to deliver two consecutive surpluses—a first in over a decade—largely thanks to:

• Low unemployment, which meant more people paying income tax

• Higher-than-expected coal and mineral prices, bringing in extra revenue

  
  

But structural budget issues remain, and the cost-of-living crisis isn’t helping.

Coalition Turns Up the Heat on Taxes

The Coalition isn’t wasting any time making this a political issue. Shadow Treasurer Angus Taylor is touring key electorates this week, hammering home the message that Australians are paying more tax.

According to the Coalition’s analysis, the average tax bill is now $3,500 higher than in 2021-22, thanks to rising wages pushing more people into higher tax brackets.

"These are the pains that Australians are feeling. We need a budget that restores Australians' standard of living," Taylor said.

The Coalition is also promising to bring back its tax cap—a self-imposed rule that limits government tax revenue to 23.9% of GDP.

Labor scrapped that cap in 2022, calling it arbitrary, though it has still kept taxation below that level. Chalmers pointed out that the only government to exceed that ratio was John Howard’s.

Where Does Australia Stand on Taxes?

For all the talk about rising taxes, Australia’s tax-to-GDP ratio, including state and local taxes, is still below the OECD average.

So while taxes are increasing, in a global sense, Australians still pay less than many other countries.

With the budget announcement just around the corner, expect plenty more debate about taxes, spending, and cost-of-living pressures in the coming weeks.