Australian Treasurer Jim Chalmers has presented the country’s budget for the fiscal year 2023/24 (July-June), which was released on Tuesday. Key highlights from the budget include the government’s forecast for the budget deficit, inflation, GDP growth, unemployment, population growth, commodity prices, and net debt as a percentage of GDP.
According to the budget, the government forecasts a budget deficit of AUD 13.9 billion for the fiscal year 2023/24, which represents 0.5% of GDP. The deficit for the fiscal year 2024/25 is expected to widen further to AUD 35.1 billion or 1.3% of GDP. On the other hand, the government projects a budget surplus of AUD 4.2 billion for the fiscal year 2022/23, which amounts to 0.2% of GDP.
Net debt as a percentage of GDP is forecasted to be 22.3% for 2023/24, increasing to 23.5% by 2024/25 and 24.0% by 2025/26. This increasing debt level may raise concerns about the sustainability of government finances, although the percentage remains relatively low compared to many other advanced economies.
The budget forecasts consumer price inflation at 3.25% for the fiscal year 2023/24, falling to 2.75% in 2024/25, and further declining to 2.5% by 2025/26. The government plans to introduce an energy relief plan, which is anticipated to lower CPI inflation by 0.75 percentage points by the second quarter of 2024.
In terms of GDP growth, the government projects a growth rate of 1.5% for 2023/24, increasing to 2.25% in 2024/25, and 2.75% in 2025/26. These figures underscore the challenges facing the Australian economy as it seeks to recover from the pandemic and navigate a more uncertain global economic environment amid geopolitical tensions and supply chain disruptions.
The unemployment rate is forecasted to be 4.25% for the fiscal year 2023/24, rising slightly to 4.5% in both 2024/25 and 2025/26. Addressing the unemployment rate will likely be a key focus for the government as it aims to stimulate economic growth and ensure a strong labor market.
Population growth is expected to pick up in the coming years, with the government raising its forecast to 2.0% for the fiscal year 2022/23 and 1.7% for 2023/24. This uptick in population growth could help support the domestic economy, but may also strain infrastructure and public services if not managed effectively.
The budget includes updated assumptions for commodity prices, which play a significant role in the Australian economy. The government has increased its assumptions for iron ore prices to $60 per tonne, metallurgical coal to $140 per tonne, thermal coal to $70 per tonne, and liquefied natural gas (LNG) to $10 per unit. These adjustments reflect a more optimistic outlook for commodity prices, providing a potential boost to the country’s exports and overall economic growth.
In summary, the Australian government’s budget for the fiscal year 2023/24 highlights its expectations for a gradual recovery in economic growth, along with improving labor market conditions and inflationary pressures. However, the budget deficit is projected to increase over the next few years, as net debt as a percentage of GDP continues to rise. While Australia’s public finances may be in a better position than many other advanced economies, the budget underscores the ongoing challenges and uncertainties facing the country as it seeks to navigate the post-pandemic global economic landscape.
