A stronger jobs market and higher-than-expected tax revenue have left the federal budget $18 billion better off, capping the biggest nominal improvement to the nation's bottom line in a parliamentary term, Treasurer Jim Chalmers said on Monday.
The final budget outcome showed a deficit of just under $10 billion for 2024/25, an improvement on the government's original forecast of a $28 billion deficit.
With debt at 0.4 per cent of Australia's gross domestic product, Australia's fiscal position was one of the strongest in the developed world, Dr Chalmers said.
That was in part down to the government exercising spending restraint, finding $14.4 billion in savings, and banking upward revisions to revenue, he told reporters.
"You can see the dividends of all of that in the final budget outcome," he said.
Australia's persistently low unemployment rate meant more workers were earning a wage and paying more tax in income and superannuation.
Total tax receipts were $13 billion higher than forecast at the Pre-election Economic and Fiscal Outlook in April, while the company tax take was $5.3 billion higher than expected.
Meanwhile, payments were $4.9 billion lower than estimated, largely down to changes in the timing of payments to states for programs such as housing and child care supports, Finance Minister Katy Gallagher said.
After years of consistently undershooting tobacco excise forecasts due to an explosion in black market cigarettes and vapes, the tobacco tax take was $441 million higher than expected because of better enforcement, Dr Chalmers claimed.
But expenses still increased from $686 billion in the prior financial year to $770 billion, driving the budget into deficit for the first time since the Albanese government was elected in 2022.
Expenditure is forecast to continue rising strongly in the next four years, driven by fast-growing programs such as the $52 billion NDIS, defence and aged care.
This will require higher tax revenue to return the budget to surplus by the middle of the next decade - something the Parliamentary Budget Office found in a recent report could only be done through bracket creep, which increases the burden on younger working Australians.
In a decade from now, the tax rate on an average full-time worker would rise from 22.8 per cent to 25.9 per cent as a result of bracket creep, according to analysis by Richard Holden, chief economist of Chartered Accountants ANZ.
The government could count itself fortunate thanks to a massive terms of trade boom in recent years, Professor Holden told AAP.
"They haven't been either particularly responsible nor particularly irresponsible. But that luck doesn't look set to continue, and it's going to just make things a lot harder going forward," he said.
Dr Chalmers denied it was the government's strategy to rely on bracket creep to pay for increased spending, arguing Labor had shown more enthusiasm for returning bracket creep through tax cuts than the opposition.
"And there is a political difference there, because we believe the best way to return bracket creep is to try and return bracket creep for all taxpayers, and not just for people who are already doing relatively well," he said.Â
Opposition Leader Sussan Ley called on the government to impose fiscal guardrails to rein in spending, accusing Labor of lacking restraint and saddling young Australians with future debt.
"This is unfair to future generations of Australians who right now cannot realise the dream of home ownership, and it is totally unfair for them to have to pay back Labor's debt," she told reporters in Albury.
The release of the final budget outcome coincided with the Reserve Bank beginning two days of deliberations on whether to cut interest rates again.
The central bank is widely expected to keep the official cash rate on hold at 3.6 per cent.
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