The report provides independent projections of the Federal Budget, including detailed estimates of future spending and revenues. It forecasts an underlying cash deficit $5.2 billion worse than estimated in the 2024-25 budget, a significant deterioration from the $15.8 billion surplus in 2023-24.

The report finds that recent consecutive budget surpluses were largely driven by cyclical revenue windfalls from commodity prices and inflation, which are now moderating. The authors attribute this to a softening economic outlook, lower commodity prices, and increased government spending. 

The report emphasises that relying on 'unforeseen' revenue upgrades is not a sustainable fiscal strategy and recommends productivity-boosting economic reforms and changes to the tax system to build a more resilient budget.

Key findings

• There is a projected shift from a $15.8 billion surplus in 2023-24 to a $33.5 billion deficit in 2024-25.
• This shift is primarily due to a decline in company tax revenue.
• Net debt is expected to increase to 19.9% of GDP in 2024-25, broadly in line with the Budget estimate.
• The last two consecutive budget surpluses saw a boost from commodity prices and inflation, however, such revenue boosts are not projected to continue.
• A resilient labour market means the expected write-downs are smaller than they would have otherwise been.
• Downgrades in revenue forecasts are anticipated across various sectors, including company tax, superannuation fund taxes, and excise and customs duties.
• Spending is expected to rise due to parameter variations (such as higher inflation) and new policy decisions, including aged care reforms and funding for ending gender-based violence.
• The 2024-25 Mid-Year Economic and Fiscal Outlook (MYEFO) is expected to reveal $16.4 billion in downward revisions to revenue over the four years to 2027-28.