Budget figures put some pep in the treasurer’s step

WHY IS THE TREASURER HAPPY?

* The underlying federal deficit was $22.3 billion in the 12 months to June 30 – $6 billion better than the government predicted in May

* The improvement was because Canberra raked in $4.6 billion more and spent $1.4 billion less than it forecast

* Australia’s debt was $971.4 billion, a decrease of $10.6 billion compared to May’s forecast

WHY HAVE THESE NUMBERS IMPROVED?

* Taxpayers contributed $2.3 billion more than expected, due to stronger-than-forecast business and investment income

* Superannuation funds had a good year trading foreign currency, which helped them throw in $1.9 billion more than predicted

* Lower capacity among providers meant the government’s Support at Home Program, which provides in-home aged care, was less expensive than expected, saving $1.4 billion

* Subsidised prescription drugs, childcare, regional development and programs relating to COVID-19 vaccinations were all between $300 million to $700 million cheaper than forecast in May

ANY BAD NEWS?

* Defence at $1.28 billion, health $1.02 billion and transport and communication $974 million were more expensive than forecast in the May budget

* About $87 million more was also spent on servicing the government’s debts and $309 million more on natural disaster relief

* The government also spent slightly more than forecast on roads, railways, home batteries, fuel refunds for miners, farmers, loggers and fishermen, and payments to renewable energy producers

* The tobacco tax take was $200 million lower than predicted, dipping below $4 billion for the first time this century, as black market cigarettes claimed more of the market

* The deficit was still considerably worse than the previous financial year’s deficit of just under $10 billion

* Tax as a proportion of GDP (24.1 per cent) and spending as a proportion of GDP (26.9 per cent) were both higher than forecast, but that was mostly due to softer-than-expected nominal GDP growth

WHAT DOES THIS MEAN?

* The final figures have landed on the eve of the Reserve Bank of Australia almost certainly hiking the cash rate to 4.6 per cent – the highest level in 15 years

* The coalition insists Labor’s runaway spending is responsible for inflation and interest rate hikes, while the government contends it is managing the economy responsibly

* With bond yields also hitting 15-year highs, the cost of borrowing is set to climb for the government, meaning any reduction in the deficit will have an outsized impact on future interest costs