Budget deficit 'unduly flattering'

When Treasurer Jim Chalmers presented his fourth consecutive Federal Budget there was a large focus on the deficit growing to $42.1 billion in the next financial year - but this was only considering the underlying figures, with economists pointing out the headline numbers paint a very different picture.

- Eliza Bavin

Off-Budget spending has soared to $85 billion over the forward estimate period, resulting in cumulative headline cash balance deficits of $236 billion over the four years to FY28/29, according to KPMG analysis.

"If we look at the headline figure right now, the Budget deficit looks even worse," AMP deputy chief economist Diana Mousina told the Financial Standard podcast.

"This is a problem because the government is making 'investments' into specific things. These go into the off-Budget measures because they count as an investment, so it's not necessarily the usual day-to-day spending or revenue measures.

"The problem is that [the money] might be going into an unproductive source, and it is still a source of spending for the government. It's just been a strategy to keep things out of the underlying budget deficit numbers."

Economist Saul Eslake tells Financial Standard it made sense, historically, to look at the underlying figure, but since around 2007 governments from both sides of the fence have used off-Budget spending to somewhat spin the actual Budget position.