Australia's government announced a reduced budget deficit for the current fiscal year, but warned of larger deficits in the coming years due to spending commitments on health, cost-of-living relief, and veterans care.
Australia 's government on Wednesday reduced its projected budget deficit for the current fiscal year but warned of larger shortfalls in the future due to unavoidable spending on health, cost-of-living relief, and veterans care. Facing a challenging election next year, the centre-left Labor government stated that the economy had slowed under the pressure of high interest rates and elevated inflation, but maintained that public spending would contribute to a soft landing.
Recent data for the September quarter revealed that without public investment in infrastructure and rebates on electricity costs, the economy would have been in recession. In its Mid-Year Economic and Fiscal Outlook (MYEFO), the government still needed to revise its forecast for economic growth in the current fiscal year ending June 2025 to 1.75%, down from 2.0% projected in its main Budget last May. Wage growth was also reduced to 3.0%, challenging the government's claim of delivering faster pay increases than the Liberal National opposition. The economic slowdown prompted the Reserve Bank of Australia (RBA) last week to signal a potential easing of monetary policy, having kept interest rates at 4.35% for the entire year. All this government spending resulted in a return to budget deficit after two years of rare surpluses, although the shortfall this year was less severe than initially anticipated. The Treasury projected a deficit of A$26.9 billion ($17.04 billion) for the current 2024/25 year. This compared to a forecast of A$28.3 billion in its main Budget last May. However, the red ink is projected to worsen in the coming years due to an additional A$25 billion in payments. The projected deficit for the three years to 2027/28 now stands at A$117 billion, or A$23 billion more than anticipated in May. 'The slippage in subsequent years is mainly because of urgent, unavoidable, or automatic increases in spending in areas like pensions, Medicare, and medicines,' the Treasury stated in a press release
Budget Deficit Australia Economy Spending
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