2022–23 independent budget snapshot from the PBO

2022–23 independent budget snapshot from the PBO

Victoria’s Parliamentary Budget Office (PBO) has released its independent analysis of the Department of Treasury and Finance’s 2022-23 Budget, comparing it to the government’s previous budget update, which was published on 10 December 2021.

Find the PBO’s full analysis at bit.ly/pbobudget.

The PBO found that in the 2022-23 Budget, the government expects:

  • a strong bounce back in economic growth in 2021–22, and a higher rate of real economic growth on average over 2021–22 to 2024–25
  • a lower unemployment rate than previously forecast in all years
  • a stronger budget position supported by the economic recovery
  • net debt to reach a peak of $167.5 billion in 2025–26 however lower than previously forecast in each comparable year (to 2024–25)
  • net debt as a share of GSP to be lower than previously forecast – down 2.2 percentage points to 25.8% at 30 June 2025, then rising to 26.5% GSP at 30 June 2026
  • net borrowing to be $7.8 billion lower from 2022¬–23 to 2024–25 (down from $43.8 billion to $36.0 billion) compared to its previous budget update.

The PBO found that when compared to the previous budget update, the government’s forecasts in the 2022-23 Budget show:

  • $7.4 billion higher revenue forecasts from 2022–23 to 2024–25, reflecting higher than expected Australian Government grants and state taxation receipts
  • $8.8 billion higher operating expense forecasts, including new health initiatives and the Commonwealth Games
  • $9.3 billion lower net asset investment forecasts.

The government revised its forecast for the net operating deficit in 2022–23 up by $2.6 billion to $7.9 billion, driven by higher operating expenses, but forecasts this to improve in subsequent years and reach a surplus of $0.7 billion in 2025–26.

The government has updated fiscal sustainability objectives since the 2021–22 Budget. The government now:

  • has a target to reach an operating surplus by 2025–26
  • aims to achieve an operating cash surplus in 2022–23 – this represents a change in the wording of the target but not a change in government forecasts of the timing of the surplus.

While this budget presents an improved fiscal position, the PBO found the government’s forecasts still show:

  • net debt as a proportion of GSP continues to grow in each year of the forecast period
  • debt servicing costs will continue to increase substantially
  • the government is unlikely to meet its own target of ‘general government interest expense as a percentage of revenue to stabilise in the medium term’ by 2025–26 without further policy intervention.

The upgraded economic outlook carries significant downside risks, including:

  • ongoing inflationary pressures – the budget inflation forecast does not factor in the strong recent quarterly outcome in the Melbourne CPI, and is likely understated
  • a slowdown in global economic activity due to geopolitical uncertainties and rising interest rates
  • a slower than expected recovery of net migration.

CONTACT: Xavier Rimmer, Acting Parliamentary Budget Officer, (03) 7035 2302.

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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