2021/22 Budget: independent snapshot from PBO

iStock budget 903735920

The Parliamentary Budget Office (PBO) has released its independent analysis of the 2021/22 Budget, located at pbo.vic.gov.au.

The PBO found that in the 2021/22 Budget, the government expects:

  • an improved economic and budget recovery from the COVID-19 recession compared to its previous budget
  • above trend growth in gross state product (GSP) and employment in the short-term
  • stronger revenue growth on the back of real estate prices lifting property tax revenues, new tax measures and higher Australian Government grants
  • net borrowing as a share of revenue – an indicator of the government’s need to raise debt to fund its policies – to decline from a peak of 32.8% in 2020¬–21 to 14.6% by 2024–25
  • net debt as a proportion of GSP to reach 24.9% at 30 June 2024, revised down 4.0 percentage points from 28.9% in the previous budget
  • the net operating deficit to be $11.6 billion in 2021–22 (revised down from a deficit of $13.1 billion in the previous budget), improving to a $2.1 billion deficit by 2024–25.


The PBO also found that compared to the previous budget, the government’s forecasts in the 2021/22 Budget show:

  • $6.7 billion higher revenue forecasts from 2021-22 to 2023-24
  • $3.0 billion lower government net asset investment forecasts
  • $1.4 billion lower operating expense forecasts.


The PBO noted that in this budget, the government has added one new fiscal sustainability objective – to achieve an operating cash surplus before the end of the forward estimates. The government expects an operating cash deficit of $17.4 billion in 2020–21, improving to a surplus of $3.0 billion by 2024–25.

The PBO assessed that while this budget presents an improved expected fiscal position compared to the previous budget:

  • with a relatively large public infrastructure program prior to the pandemic, overlayed with increased debt required to recover from the pandemic, the government has spent more than it receives in revenue since 2017/18
  • in the last budget, the government introduced a financial target that its interest expense as a percentage of revenue will stabilise in the medium term. It has maintained this financial target in this budget. Based on the government’s own forecasts, this ratio will continue to climb.
  • whilst lower than many international jurisdictions, the government’s forecast fiscal position over the medium term is deteriorating.


To keep up to date on the PBO’s work visit the PBO website at pbo.vic.gov.au or follow the PBO on Twitter at @pbovic.


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