Katy Gallagher, Jim Chalmers to report $22 billion budget surplus

The Final Budget Outcome due to be released on Friday is expected to show a massive $100 billion turnaround in the underlying cash balance to reach $22.1 billion in 2022-23, the first surplus in 15 years.

Underpinning the big improvement has been a surge in personal income and company tax revenue and a decline in JobSeeker and other government payments. The government claims to have also saved almost $18 billion from cuts and reprioritised spending.

Finance Minister Katy Gallagher said the result showed the success of efforts to strengthen the government's financial position.

"The [government] has done the hard work in our first two budgets to put Australia's balance sheet back on a sustainable footing," Senator Gallagher said.

The government will claim that 95 per cent of the revenue windfall has been saved, making gross Commonwealth debt $87.2 billion less than had been estimated before the last election, saving around $12 billion in interest payments by 2026-27.

The financial result for 2022-23 is much stronger than the government had forecast in the May budget, when it estimated the surplus would reach $4.2 billion.

But the government stands by expectations the surplus will be a one-off.

According to projections in the Intergenerational Report, the budget will swing back into deficit this financial year and remain there for the next 40 years as the tax base narrows and an aging population drives up government spending.

The outlook has reignited debate about the need for far-reaching tax reform to reduce reliance on income tax by increasing the GST, taxing super profits in mining, banking and other sectors and improving the taxation of wealth.

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But the government has so far shown no appetite for tax changes beyond its moves to strengthen the petroleum resource rent tax, wind back the tax breaks for large super balances and tightening the taxation of multinationals.

Acknowledging the likelihood of a deterioration in the budget position in coming years, Treasurer Jim Chalmers said that "structural pressures are intensifying rather than easing on the budget".

"These will take more than one year or one parliamentary term to address," Dr Chalmers said.

But he said the government's budget strategy was to take pressure off inflation, interest rates and living costs.

"By banking most of the revenue upgrade when inflation was at its peak, our budget strategy has been exactly right for the times and suited to the challenges we confront," the Treasurer said. "It's taken pressure off inflation, interest rates and the cost of living."

But the opposition has accused the government of making the inflation problem worse, claiming its spending has added to demand in the economy.