FX168 Financial News (North America) News Australian Treasury Secretary Jim Chalmers (Jim Chalmers) will announce that the Australian government's fiscal accounts have surpluses for the second year in a row, which will bring the country's fiscal position close to the highest level in developed countries.
(Source: Bloomberg)
Prior to the announcement of the budget on the evening of Tuesday (May 14), the Australian Treasury said in a press release that the basic cash surplus will reach 9.3 billion Australian dollars (6.1 billion US dollars) in the 12 months ending June 30, accounting for 0.4% of the gross domestic product (GDP). By contrast, the projected deficits for the US and the UK this year are 6% and 3.6% of GDP, respectively.
Chalmers said in a statement: “Another surplus is strong proof of Labor's responsible economic management, which leaves room for future cost of living relief and investment. Despite the significant progress we have made, spending pressure continues to increase.”
Australia's budget will return to deficit in the 2025 fiscal year and remain in deficit in the 2026 fiscal year. The Treasury sent a signal that Australia's budget outlook is weaker than the forecast in December last year. According to a Bloomberg survey, Australia's median deficit is expected to be 14 billion Australian dollars in fiscal year 2025 and will rise to nearly 25 billion Australian dollars in a year, accounting for 1% of GDP.
The center-left Labor Party government will face a general election in the next 12 months. As voters' dissatisfaction with rising prices and high interest rates is growing, the Labor Party's position in public opinion polls has been weakened. Chalmers has proposed budget measures aimed at addressing these concerns, including broad tax cuts and housing.
Chalmers said, “The main motivation behind this budget is that people work hard. Every taxpayer will get tax deductions, but in addition to that, there will also be additional help with living expenses. At the same time, we are trying to build more houses because not having a home is one of the reasons people are under pressure.”
Normally, Australia's budget surplus is a political victory for the government, as it shows that the government has strong economic regulation — even when driven by external factors such as rising commodity prices.
However, since interest rates are at their highest level since the end of 2011, and market pricing shows that it is unlikely that policies will be relaxed until early 2025, the government is under pressure to respond.
It has proposed further measures in its fiscal blueprint to help mitigate price increases. Earlier this week, the Ministry of Finance's forecast indicated that the inflation rate would return to the Reserve Bank's target of 2-3% by the end of this year, 12 months ahead of the central bank's forecast.
This is due to the government keeping fiscal policy in line with currency settings through budget surpluses. This prudence has helped ensure that Australia remains one of the few economies to receive coveted AAA credit ratings from the top three rating agencies.
Chalmers said the budget will prioritize inflation in the short term and then focus on preparing for future economic growth.
He said this week that this will have a greater impact on the critical mining industry. A core pillar will be the “Made in Australia for the Future” program, a set of measures to stimulate high-tech and green manufacturing, similar to the US “Inflation Reduction Act.”
Treasury Secretary Katie Gallagher said: “Managing the budget responsibly means we can provide cost of living relief for Australians and invest in a future made in Australia. We take economic management very seriously.”