By Poppy Johnston in Canberra

Australia is waving goodbye to budget surpluses and returning abruptly to deficit, facing a $49 billion deterioration in the bottom line as per forecasts from leading economists.

The $15.8 billion surplus logged in the last financial year to Deloitte Access Economics’ prediction of a $33.5 billion deficit in 2024/25 would amount to largest nominal contraction in the underlying cash balance on record, outside the pandemic.

The forecast would also represent a $5.2 billion mark down from Treasury predictions made in May budget.

“Worryingly, there is little to suggest that the situation will right itself in the years to come,” DAE partner and report co-author Stephen Smith said.

As well as the well-documented pressures on the public purse from an ageing population, Mr Smith warned global developments – including China’s economic slowdown and Donald Trump’s return to the White House – did not bode well for Australia’s budget position.

“Should substantial tariffs be slapped on imports into the United States, including at rates of up to 60 per cent of goods from China, Australia’s budget will not be immune given its reliance on commodity prices via company tax receipts,” he said.

With a federal election on the horizon, spending commitments could pile up as the government and opposition promise extra cost-of-living support and other sweeteners.

Though the economists were hopeful inflation would keep a lid on election spending sprees, as cost-of-living support eases pain but injects money into the economy – adding to the problem it’s trying to solve.

Treasurer Jim Chalmers has already been managing expectations ahead of the mid-year budget update next month.

In a speech, he warned windfalls would be nought but a “sliver” of upgrades clocked in the past few years.

Higher commodity prices and a higher tax take from migration and bracket creep have helped the federal government deliver the first two back-to-back surpluses in almost two decades.

These conditions and Treasury’s conservative estimates for commodity prices have helped fuel revenue upgrades of $80 billion, on average, at the past four budget updates.

DAE partner and report co-author, Cathryn Lee, said the government still deserved credit for banking most of the revenue rather than spending it, especially during a cost-of-living crunch when the community has been calling for support.

Yet she said both major political parties had broadly failed to embark on the structural budget repair needed over the past two decades.

“The structural budget position – that is, what the budget balance looks like after correcting for the swings and roundabouts of the economic cycle – is in deep deficit, meaning that without cyclically serendipitous commodity price booms, a surplus is out of reach,” Ms Lee said.

Yet she highlighted “steps in the right direction”, including reform to the aged-care system to slow its growth and a new $900 million National Productivity Fund.

“The time will come for changes to tax,” she said. “It must.

“In the meantime, governments hoping to continue to unveil ‘surprise’ revenue upgrades year after year will be disappointed.”