Improved tax earnings from a higher employment rate and lower spending on social security are responsible for the improved Budget position, according to Treasurer Scott Morrison.
“What this shows us is that the government has been keeping expenditure under control,” Mr Morrison said.
The result is also lower than the deficit in last year’s final budget outcome, which came in at $39.6 billion for 2015-16.
Finance minister Mathias Cormann said improved revenue – or money coming in from tax and other sources – was responsible for the “biggest improvement”, rather than lower spending.
But on the spending side, the government said its cuts to welfare payments were the main saving.
Senator Cormann also credited “lower than anticipated payments” to the National Disability Insurance Scheme, caused by a slower-than-expected rise in the number of people transitioning on to the scheme.
Labor credits ‘good luck’ for the result
Labor’s shadow finance spokesman Jim Chalmers said the improvement was “very minor” and the debt remained too high.
“We've got record gross debt, we've got record net debt and this government is out there crowing about an expected and very minor improvement to the Budget,” Mr Chalmers said.
He said underspending on the NDIS, increased rebates from pharmaceutical companies and delays in infrastructure spending were all responsible for the improved bottom line.
“Scott Morrison and Mathias Cormann expect a pat on the back for a Budget outcome today which is more about good luck than good policy,” Mr Chalmers said.
Deloitte economist agrees tax the main factor
The lower deficit is mostly a product of both workers and companies paying more tax than the government expected they would back in May, according to Chris Richardson of Deloitte Access Economics.
“Most of the good news is in tax,” he told SBS World News.
“More jobs means more personal tax, more profits means more company tax.” There were also improvements in GST tax revenue.
He said the statistics were “genuinely happy news”, but warned an economic boost from improved conditions in China may not be a permanent trend.
He agreed slower-than-expected spending on infrastructure and the NDIS was also a factor.
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