Higher iron ore prices and a $4.6bn underspend on the NDIS have returned the Australian budget to balance for the first time in more than a decade, but low consumer spending continues to be a drag on the economy.
The treasurer, Josh Frydenberg, announced the final budget outcome for 2018-19 on Thursday, revealing a deficit of $700m – $13.8bn better than forecast in the budget.
The figure puts the federal budget effectively in balance for the first time since 2007-08, when the most recent surplus of $19.7bn was recorded.
Frydenberg credited the government’s “strong fiscal management” for the result, pointing to $11.5bn in higher receipts and $6.6bn in lower payments as the reason for the improvement.
The final budget outcome shows stronger than expected tax receipts from both companies and individuals, up $8.1bn compared to the budget, and a $6.4bn underspend on the National Disability Insurance Scheme, the DisabilityCare Australia Fund and family tax benefits.
But indirect taxation revenue, which includes GST, petrol, alcohol and tobacco taxes, was down almost $5bn compared to the estimate in May last year, reflecting a slump in household consumption.
Real GDP grew by 1.9%, which was softer than the 3% forecast at budget time, but nominal GDP – which underpins the budget balance – grew by a stronger than expected 5.3%.
Growth in household consumption, dwelling investment and business investment were all below forecast, but the increase in iron ore prices “more than offset” the softer than expected growth elsewhere in the economy.
Frydenberg said that he would like to see household consumption higher, saying it accounted for 60% of GDP.
“One of the ways we can drive that is through the tax relief that is being legislated through the parliament,” he said. “We are taking action to lift household consumption but there is also uncertainty out there, and I don’t think anyone wants to overlook that fact. There is uncertainty in the global economic outlook and that impact on investment decisions here at home.”
Frydenberg also pointed to strong labour market conditions that saw an extra 300,000 jobs created being better than expected, growing by 2.6% throughout the year compared to the 1.5% forecast.
The underspend on the NDIS, which was due to “slower than expected” transition of participants into the NDIS and lower utilisation of participants’ individual support packages, amounted to $4.6bn.
Frydenberg said the discrepancy was because the NDIS was a “demand driven system”.
“This is in part because of the delays in some of the states coming on board, and also because it’s taken a bit more time for the service provider market to develop sufficiently to meet the available demand it has taken,” Frydenberg said.
But he said there was no policy decision to cut funding to the NDIS.
Labor’s shadow treasurer, Jim Chalmers, said the final budget outcome was the result of “bad faith” because of its reliance on the NDIS underspend, and the “good luck” of iron ore prices.
“The budget improvement is welcome but it’s not a consequence largely of good actions from the government,” Chalmers said.
Labor’s shadow minister for government services, Bill Shorten, said the government had improved the budget outcome by “tightening the taps of the NDIS”.
“It’s a national shame, it’s a disgrace, the Morrison government is balancing its books on the backs of Australia with disabilities and their loved ones,” Shorten said.
Labor also targeted the government in Question Time over the disability insurance scheme, with deputy leader Richard Marles asking about the number of Australians who were waiting for care packages.
“Is the government seriously suggesting that Australians with a disability aren’t out there waiting for care packages?” Marles said.
Chalmers said the treasurer needed to admit that “today’s budget outcome would not be possible without making Australians with a disability wait for the care that they need and deserve and were promised so that he can add $4.6 billion to the budget line.”
The minister responsible for the NDIS, Stuart Robert, said that while there were fewer participants that expected, the amount being spent was $46,800 per person, $400 more than forecast.
Frydenberg said that “everyone who has been approved in the program is getting support under a fully funded NDIS.”
“Only the Coalition can fund services like the NDIS, that Australians need and deserve.”
The final budget outcome coincided with new jobs figures from the Australian Bureau of Statistics, which showed the unemployment rate up a notch to 5.3%.