Ahead of the budget,Mr Frydenberg said thegovernment was aiming to drive unemployment below 5 per cent to lift wages growth but despite economic improvement,it is expected to remain sluggish. Treasury is tipping wages to grow 1.5 per cent next year after a record low of 1.25 per cent in 2020-21.
The budget has benefited from an extra $110 billion in revenue over the forward estimates,much of that driven by higher iron ore prices which have contributed to a sharp upgrade in expected company tax receipts.
The strong sharemarket has also delivered a windfall to the government,with superannuation taxes upgraded by 43 per cent this year and 20 per cent next year. Luxury car tax collections have been revised up by 42 per cent.
While benefiting from extra revenue,the government is spending an extra $96 billion over the four years to 2024-25. Net government debt has been revised down from what was expected during the depths of the pandemic. It is now forecast to peak at 40.9 per cent of GDP in mid-2025 before slowly edging down to 37 per cent by mid-2032.
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While gross debt as a share of GDP is down on the October budget forecast,by 2024-25 it will have reached a record high of $1.2 trillion. By 2032,it is on track to have reached almost $1.7 trillion.
For the first time in a decade,the cost of government borrowing is starting to go up.
Between 2020-21 and 2023-24,the interest costs on government debt are $3.1 billion higher than had been forecast in last October’s budget. The biggest increase is in 2023-24 with the interest bill that year $2 billion higher than forecast.