Jim Chalmers says Labor has returned 88 per cent of revenue upgrades to the budget, compared to 40 per cent under the Coalition. Is that correct?

The claim

Ahead of next month’s federal budget, Treasurer Jim Chalmers has looked back on his first post-election meeting with Treasury Secretary Steven Kennedy and revealed how the pair discussed „shooting for a surplus“ in Labor’s first term.

„We knew then that if we saw an opportunity to get the budget back into the black at some stage in our first three years, we should go for it,“ Mr Chalmers said in a pre-budget address to the Committee for Economic Development of Australia.

„That’s why instead of only banking around 40 per cent of revenue upgrades like our predecessors averaged, we banked 88 per cent.“

Has Labor banked 88 per cent of revenue upgrades, compared to the Coalition’s 40 per cent? RMIT ABC Fact Check investigates.

Hands put Australian coins into a wallet.

Did the Coalition save 40 per cent of revenue windfalls, compared to Labor’s 88 per cent?(AAP)

The verdict

Mr Chalmers’s claim is close to the mark.

Figures supplied by Treasury and verified by Fact Check using budget documents show that Labor has returned 88.4 per cent of its tax revenue upgrades to the budget since coming to office.

The same figures show that the Coalition returned 44.7 per cent over seven revenue upgrades.

These figures only take into account revenue upgrades resulting from increases in tax receipts. However, experts noted that governments can also find themselves with additional money to spend if their expenses turn out to be lower than anticipated.

Taking these and other budget variations into account, which is the methodology preferred by the Grattan Institute, Fact Check calculates that Labor has banked 85.4 per cent of upgrades compared to the Coalition’s 45.1 per cent.

The Coalition’s time spans the peak of the COVID-19 pandemic, which experts told Fact Check should be kept in mind when interpreting the figures. It could be argued, they said, that returning revenue upgrades to the budget at that time was not prudent fiscal management.

It’s also important to note that while the budget treats certain variations as being the result of factors out of the government’s control — and therefore contributing to revenue upgrades rather than budgetary costs — such classifications are open to a degree of interpretation.

Ultimately, the bigger question of which party is a better fiscal manager can not be answered by these figures alone, experts said, and is beyond the scope of this fact check.

What is a revenue upgrade?

Red dirt with mining equipment on top.

External factors such as the iron ore price can affect the revenue the government receives.(AAP Image)

Federal budget documents forecast whether, over the coming years, the government’s spending will exceed its revenue.

While there are several ways to measure this balance, the Parliamentary Budget Office notes that when the government says the budget is in surplus or deficit, „they are generally referring to the underlying cash balance“.

„If the underlying cash balance is in deficit, the government has to borrow money because it does not have sufficient cash to fund its day‑to‑day operations and the net purchases of assets, like the equipment it uses to deliver goods and services,“ the PBO says.

Conversely, if there is a surplus, the government has more cash than it needs to operate.

Forecasts of the underlying cash balance are underpinned by estimates of how revenue will be impacted by government policy decisions and, separately, by forces in the wider economy largely beyond the government’s control.

Changes to the latter estimates resulting in more money for the government to spend over the coming budget years are known as revenue upgrades, and are reflected in budget documents as „parameter and other variations“.

These would include higher-than-expected tax receipts resulting from an increase to the iron ore price, for example, but would not include a revenue boost resulting from government-implemented tax increases.

When the government receives a revenue upgrade, it can choose to either spend the additional revenue on policy decisions or return it to the budget as savings.

Parameter variations can also result from lower-than-anticipated payments the government needs to make in areas such as healthcare and welfare.

And they can also affect the amount of non-tax revenue the government receives, such as interest returns from cash deposits.

While Mr Chalmers spoke of „revenue upgrades“, which could be narrowly defined as those relating to tax revenue only, Fact Check acknowledges that other variations can also affect the amount of money the government has to spend in a given budget.

Treasury data

This is not the first time Mr Chalmers has made his claim about Labor banking its revenue upgrades.

In a February media release celebrating the reaffirmation of Australia’s AAA credit rating by ratings agency S&P, the Treasurer said:

„Across two budgets and a MYEFO [Mid-Year Economic and Fiscal Outlook] we have returned 88 per cent of revenue upgrades, compared to 40 per cent under the former government.“

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