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.
- Published: Monday, 09 May 2022 11:33