Weak productivity remains as higher surplus recorded

Productivity growth has returned to pre-pandemic levels, as the federal government touts a larger-than expected surplus.

Data from the Productivity Commission shows while labour productivity grew by 0.5 per cent in the year to June, the rates fell by 0.8 per cent in the most recent quarter.

The drop in the June quarter came after a 1.1 per cent growth in the number of hours worked, compared to just a 0.2 per cent increase in output.

The commission's deputy chair Alex Robson said productivity trends had returned to the rate seen in the five years before the start of COVID-19.

"During the pandemic, aggregate productivity rose but then fell as restrictions were eased," Dr Robson said.

"This bubble has now well and truly burst and our productivity levels remain at about its 2015-2019 average."

Productivity levels surged the most in arts and recreation services, followed by electricity, gas, water and waster services, coming in at 7.6 per cent and 6.1 per cent respectively.

Administrative and support services fell in the same period by 4.2 per cent, while retail trade dropped by 3.6 per cent.

The data coincided with the federal government announcing it recorded a $15.8 billion surplus for the 2023/24 financial year, a $6.4 billion improvement on its forecast in the May budget.

The final budget outcome, released on Monday, showed the budget being $6.5 billion higher than forecasts put forward in May.

It's the first time a government has handed down a consecutive surpluses since 2007/08.

Treasurer Jim Chalmers said the result largely came from lower government spending.

"The key to these two surpluses is the fact that when we've got upward revisions to revenue because the labour market's been a bit stronger, or our exports have been performing well, we've banked almost all of those," he told ABC radio.

"If we hadn't shown that spending restraint, we wouldn't be anywhere near these two consecutive surpluses for the first time in almost two decades."

The government returned 87 per cent of revenue upgrades to the budget last financial year since the pre-election economic and fiscal outlook.

Payments as a share of gross domestic product in 2023-24 were 25.2 per cent, lower than the 27.1 per cent previously forecast.

The surplus is expected to make up 0.6 per cent of the nation's total economic output.

The treasurer said while commodity prices had been higher, they were not the only factor behind the surplus.

"The improvement from our expectations of the surplus in May to the final budget outcome that we're reporting today is not about more revenue, it's not about higher commodity prices, it's not about more taxes ? it's about the less spending," he said.

"We always take a deliberately conservative approach to commodity prices, and that's been warranted."

While consecutive surpluses have been locked in, the government has forecast a deficit of $28.3 billion for the 2024/25 financial year.

Opposition finance spokeswoman Jane Hume said higher deficits were on the way and the extent of the surplus was exaggerated.

"It looks like those surpluses that Jim Chalmers has delivered have been delivered not by his hard work but by (taxpayers') hard work," she told Sky News.

"Jim Chalmers inherited a strong economy with low levels of unemployment, and in fact, we've seen a deteriorating position since then."

While the government has been talking up the surplus, Tasmanian senator Jacqui Lambie said the improved budget bottom line did not mean much for people dealing with the increased cost of living.

"People are doing it hard out there. Nobody's talking about a surplus," she told Nine's Today program.

"If they were, and they truly understood that, well how about you put some of that surplus out to us so we can put bread and milk on the table for our kids and do that without raising inflation."