Unemployment is still at record lows, and today inflation has fallen from 6.8% last quarter to 5.6%.
Inflation being lower means interest rates might be on hold.
The first surplus in 15 years is now expected to be bigger than the forecast of $4.2 billion.
“We are on track to deliver that surplus, in fact, we’re in a significantly better position than we forecast,” Treasurer Jim Chalmers said in a speech to the Property Council of Australia.
“This is what happens when you’ve got a government which takes its responsibilities to manage the budget and manage the economy the right way seriously,” he added.
However, predictions economic growth could slow from 3.6% last year to just half a per cent while unemployment could climb as high as 5%.
“Look, it might be a bit early to break out the champagne, but we are definitely headed in the right direction, particularly with those inflation numbers,” economist Nicki Hutley has said.
“But we have a long way to go, unemployment is going to rise further, and inflation has still got a long way to come down, so, don’t break out the bubbly just yet.”
Any further interest rate rises will force homeowners to spend a record amount of their income on mortgage repayments.
Hutley also explained that there is at least a 50 per cent chance that Australia might hit a recession. “Even if we don’t get a technical recession, we’re still in tough times with rising unemployment, high mortgages for some time to come, and inflation taking a while to come down.”
A bigger budget surplus is good news for the government but cold comfort for Aussies weathering the cost-of-living storm.
Evan Lucas from InvestSMART told The Project “47.5% of government revenue comes from personal income tax. And if you talk about relief for the everyday person, that is the question that everybody’s asking.”
“The amount of tax you’re giving through working is actually almost half of the government’s coffers.”
Lucas then explained that if the government were to start handing out some of this money from this surplus, then it would cop the blame for inflation. He said this is where the Treasurer should be in lockstep with the RBA governor to avoid blowing out inflation.
