Australians grappling with rising mortgage costs are unlikely to take much comfort from the federal government’s latest budget figures, despite Treasurer Jim Chalmers declaring a better-than-expected result.
The government’s final budget outcome for 2025-26 revealed an underlying cash deficit of $22.3 billion, $6 billion lower than forecast in May.
The improvement was driven by stronger revenue and lower spending, with Canberra collecting $4.6 billion more than expected while spending $1.4 billion less than forecast.
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That stronger result helped push gross debt down to $971.4 billion, about $10.6 billion below Treasury’s most recent prediction.
Chalmers said the figures reflected the government’s economic management, but acknowledged households remained under pressure.
“Despite this very welcome improvement in the budget, we know that pressures are intensifying rather than easing,” he said.
The budget boost was fuelled by stronger tax collections from investors and businesses rather than wage earners.
Tax receipts from individuals and other withholding taxes exceeded forecasts by $2.3 billion, while superannuation funds delivered a further $1.9 billion in additional revenue after stronger-than-expected foreign exchange gains.
Meanwhile, spending came in below forecasts across several programs.
The government’s Support at Home aged-care scheme cost $1.4 billion less than expected because providers were unable to deliver services at the anticipated rate.
Lower spending was also recorded on prescription medicines, childcare, regional development projects and COVID-19 vaccination programs.
Defence costs were $1.28 billion higher than forecast, health spending exceeded projections by $1.02 billion and transport and communications spending was nearly $1 billion above budget estimates.
The government also spent more than expected on natural disaster relief, roads, rail projects, home battery subsidies and renewable energy programs.
While the stronger budget result gives Labor fresh ammunition in its fight with the Coalition over economic management, the figures arrived less than 24 hours before a widely expected Reserve Bank interest rate hike.
Economists and financial markets expect the central bank to lift the cash rate to 4.6 per cent on Tuesday, which would take interest rates to their highest level in 15 years.
The prospect of another increase has overshadowed what would otherwise be a positive day for the government.
Opposition figures have repeatedly argued government spending is contributing to inflation pressures and forcing the Reserve Bank to keep rates higher for longer.
Liberal MP Zoe McKenzie said Australian families were already struggling with elevated borrowing costs.“
The average Australian household with a mortgage is already having to find more than $30,000 a year in after-tax dollars just to meet the interest payments on their mortgage,” she said.
The budget papers also revealed another headache for Treasury, with tobacco excise revenue falling $200 million short of forecasts and dropping below $4 billion for the first time this century as illicit tobacco continues to erode the legal market.
Rising global oil prices are also threatening to keep inflation elevated, with Brent pushing above US$100 a barrel as tensions in the Middle East weigh on supply expectations.
For the government, the improved budget bottom line is evidence its efforts to rein in spending are working.
For households facing the prospect of higher mortgage repayments within days, the more immediate concern is whether inflation is easing quickly enough for interest rates to start moving in the other direction.