The federal government’s long-term plan to return the budget to surplus by 2034-35 is facing significant scrutiny following a new report from the Parliamentary Budget Office. The independent watchdog warns that the projected path to a balanced budget relies on a series of assumptions that are historically unlikely to occur. While the current outlook suggests a $31.5 billion deficit will gradually shrink, the PBO notes that this scenario depends on strict spending restraint and a lack of future tax relief for households.
Central to the government’s forecast is the assumption that temporary programs will be allowed to expire and that public service expenditure will be curtailed. However, the PBO points out that successive governments have rarely adhered to such rigid spending limits over a decade. Instead, political pressure typically leads to the extension of programs and the introduction of new initiatives, which often derail long-term fiscal consolidation plans.
Another major factor is the role of bracket creep, where rising wages push taxpayers into higher tax brackets, effectively increasing the government's revenue over time. The budget projections assume this process will continue unchecked for ten years. If the government chooses to return this extra revenue to workers through tax cuts—a move Treasurer Jim Chalmers has previously signaled—the return to surplus would be pushed well beyond the mid-2030s.
Structural spending pressures, particularly within the National Disability Insurance Scheme, also pose a risk. The government’s plan counts on significant savings from an NDIS overhaul that has yet to be fully legislated. If these reforms fail to curb the scheme's growth as expected, the budget deficit could remain a persistent feature of the national finances for the foreseeable future.