“The government wants a pat on the back for conservative forecasts,but we’d prefer if it was conservative with its spending,” he said.
“The challenge of inflation is that spending more only makes it worse. The government must address the source of inflation,not just the symptoms.”
But Greens finance spokeswoman Barbara Pocock said the government could surely find some room in the surplus to fund an additional $2.5 billion of public housing and increase the rate of JobSeeker as a top priority.
“It’s clearly wrong to be banking a surplus of that size when ordinary Australians are struggling with extraordinary cost-of-living pressures,” she said.
Chalmers said the government would use part of the surplus to “take some of the edge” off the federal government’s debt interest bill.
He also said it was important to set aside a large chunk for the future as the economic outlook remained uncertain.
“Even though the budget is in much better nick in the near term,we’ve still got those longer-term intensifying pressures,” he said.
Independent economist Nicki Hutley said much hinged on Wednesday’s inflation figures,which will be a key factor in the Reserve Bank board’s decision to either keep interest rates at 4.1 per cent or lift them at its next meeting on August 1.
Hutley said even if inflation continued to ease as expected,there was still a long way to go to get it back to the bank’s target of 2 to 3 per cent,and handing out more cash should be the last thing the government wanted to do.
“Banking most of the surplus is sensible,” she said.
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“I think that’s very sensible,as long as they’re keeping fiscal policy tight by not giving in to the temptation to splurge. I know people are doing it tough,but that is just going to make it tougher.”
Economist Chris Richardson said further cost-of-living relief would be unhelpful.
“If inflation improves,it reduces the need for cost-of-living relief,” he said. “There is no case for the government to inject further money into the economy.”
The final budget figures for last financial year will be confirmed in the coming weeks,but Chalmers said the surplus was likely to be just above $20 billion. Australia’s largest surplus to date was $19.8 billion in 2007-08.
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In May,Chalmers forecast a $4.2 billion surplus for 2022-23 – the first in 15 years – but since then,higher income tax receipts and increased company tax due to commodity price rises have helped deliver about $16 billion more in revenue than had been expected.
On Monday,the treasurer also announced Chris Barrett would be the next chair of the Productivity Commission,taking over from Michael Brennan in September.
Chalmers said Barrett has been tasked with renewing the commission as part of the government’s shake-up of the country’s major economic institutions.
But the appointment will be heavily scrutinised by the Coalition,with shadow treasurer Angus Taylor saying the Coalition was not consulted.
Barrett has been a deputy secretary for Victoria’s Treasury and Finance Department since January 2021,was Australia’s OECD ambassador in 2011 and was chief of staff to former Labor treasurer Wayne Swan.
Chalmers said the commission would remain “fiercely independent”.
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