Last year’s budget deficit has improved by $340m, helped largely by a $1.3bn delay in major government partnerships that could push spending into the next budget cycle.
The 2015-16 final budget outcome, released on Friday, showed a $39.6bn underlying cash deficit, or 2.4% of gross domestic product.
Net government debt has risen to $296.4bn, or 18% of GDP, an increase of $10.7bn compared with the estimate in the 2016-17 budget.
The $340m improvement in the bottom line was caused by government spending being $1.6bn lower than expected, however revenue was also down $1.1bn on what was expected in the 2016-17 budget.
Lower revenue was due to tax receipts falling $2.5bn, including company tax receipts down $1.8bn, income tax down $1.3bn and GST down $350m. Non-tax receipts increased by $1.4bn due to larger than expected recoveries from states and territories in relation to aged-care programs.
The tax receipt write-downs add further weight to the fact decreases in revenue have contributed to budget deficits, which the treasurer, Scott Morrison, has grudgingly accepted constitutes an “earnings problem”.
The future fund earned $190m more than was expected at the 2016-17 budget.
Of the $1.6bn decrease in spending, $1.3bn was “due to delays in the achievement of project milestones under a range of national partnership agreements, including the asset recycling initiative”.
Those delays could push spending into the 2016-17 financial year, putting pressure on this year’s budget.
On Friday the finance minister, Mathias Cormann, said the outcome showed “the government is continuing to repair the budget by lowering the spending growth trajectory of the previous Labor government”.
Morrison defended his decision to only give Victoria $877m in federal funds from the asset recycling scheme rather than the $1.45bn the state government expected.
In 2015-16, real GDP rose 2.9%, up from the 2.5% forecast in the 2016-17 budget.
“The stronger growth was the result of larger than expected contributions from net exports, public final demand and dwelling investment,” the final budget outcome paper said.
“These factors, together with steady growth in household consumption, more than offset the impact on the economy of declining mining investment.”
In fiscal balance terms, the 2015-16 final budget outcome improved by $2.0bn compared with the fiscal balance deficit estimated at the time of the 2016-17 budget. That was due to $1.3bn lower revenue, $2.8bn lower expenses and $526m lower net capital investment.
Before the 2015-16 budget the then Abbott government had promised to increase investment to help reach a global growth target of 2%.
The final budget paper attributed that difference to lower interest rates increasing the market value of government securities.
In a speech to the Lowy Institute on Friday, Morrison said that government debt was growing at the rate of $1.4bn a week.
He criticised Labor for proposing to increase the deficit by $16.5bn.
“Just raise taxes or borrow more, what could possibly go wrong?,” he said.
