Turnbull government claws back $4 billion from budget deficit

Australian Minister for Finance Mathias Cormann (left) and Treasurer Scott Morrison during a press conference in Sydney, Tuesday, September 26, 2017. The federal government's final budget outcome for 2016/17 was a deficit of $33.2 billion and an improvement on its May forecast. (AAP Image/Daniel Munoz) NO ARCHIVING
Australian Minister for Finance Mathias Cormann (left) and Treasurer Scott Morrison during a press conference in Sydney, Tuesday, September 26, 2017. The federal government's final budget outcome for 2016/17 was a deficit of $33.2 billion and an improvement on its May forecast. (AAP Image/Daniel Munoz) NO ARCHIVING
Generic scenes at Clontarf Reserve. NDIS, disability, disabled, wheelchair, carers. Thursday 4th May 2017 AFR photo Louie Douvis .

Generic scenes at Clontarf Reserve. NDIS, disability, disabled, wheelchair, carers. Thursday 4th May 2017 AFR photo Louie Douvis .

The Turnbull government has clawed back $4 billion from the budget deficit by making billions of dollars in savings from payments to disabled people, students and the unemployed.

The figures from Tuesday's final budget outcome show the government saved $1.1 billion on payments for services for disabled Australians between July 2016 and July 2017.

"On the spending side the largest item in terms of less-than-expected expenditure is lower than anticipated payments to the National Disability Insurance Scheme reflecting a more gradual transition of participants," Treasurer Scott Morrison said in Sydney on Tuesday.

The government says the saving is also a result of fewer people being dependent on government support.

"When you look back over the past 12 months we had 250,000 jobs created," said Mr Morrison.

"So that was more people becoming economically independent in our society."

The NDIS has also been hampered by roll-out delays that has prevented it from processing thousands of applications from disability providers.

Overall, the government spent $2.5 billion less on all social security and welfare payments than it had estimated at the May budget, with biggest savings outside the disability sector coming from students, aged care, payments to families with children and general administration.

Students received $656 million less in payments including Youth Allowance, after the government launched a crackdown that resulted in thousands being sent "robo-debt" notices.

The government also saved up to $250 million on immigration, including at the offshore detention facilities in Manus Island and Nauru, as well as onshore facilities across Australia and border protection units.

As of July 31, there were 1298 people being held in Australia's immigration detention system, down from 5697 in 2012.

"Payments for onshore compliance and detention numbers for the strong and effective control of our borders are lower than expected," Finance Minister Mathias Cormann said.

The final budget outcome does not detail if the $250 million saving also accounts for a $70 million class action compensation payout to 2000 asylum seekers for physical and psychological harm.

In transport, more than $330 million in increased spending on rail effectively cancelled out the $400 million plus savings on road transport, while health provided the biggest over-spend of all the sectors.

Almost $710 million more flowed to pharmaceutical benefits than had been budgeted in May.

On the revenue side, Tropical Cyclone Debbie took out a quarter of a percentage point from growth in the June quarter, with a significant impact on coal exports, as the budget predicted.

And while Australia is set to eclipse Qatar as the world's biggest exporter of liquefied natural gas, the tax revenue from the controversial petroleum resource rent tax is $74 million less than Mr Morrison had hoped for in May.

Despite the small resource setbacks, Deloitte Access economist Chris Richardson said good economic fortunes were showing up in profits and tax revenue.

"The budget is an enormous survey of the economy; the fact that taxes outperformed spending shows the best synchronised growth in a decade."

He said the economy had ridden on the back of iron ore and China's demand for resources.

"It's the oldest equation in the budgetary book: if China looks better, then the budget looks better."

The underlying cash deficit, at $33.2 billion, is $4.4 billion better than the $37.6 billion forecast in the 2017-18 budget, and now equals less than 2 per cent of gross domestic product for the first time in four years.

Mr Morrison said the government was borrowing to ensure Australia did not draw down on the future fund, and could meet its unfunded superannuation liabilities.

"From July 1 the government will no longer be issuing securities to pay for recurrent expenditure," he said.

"So you won't have to borrow money to pay for the welfare bill and you won't have to borrow money to pay for everyday expenditure in health and education."

Mr Morrison acknowledged gross debt, which now equals more than $500 billion, is at "a high level" but argued revenue would be sufficient to meet those expenses from next year.

Mr Richardson warned that unless more was done to pull the budget back to surplus the prosperity would be wasted.

"This prosperous generation has been made at the door step of younger Australians," he said.

"They are getting royally screwed and they will be until they wake up."

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This story Turnbull government claws back $4 billion from budget deficit first appeared on The Sydney Morning Herald.