Australia forecasts first annual budget surplus in 15 years

The Australian government forecast the nation’s first balanced annual budget in 15 years but warned Tuesday that economic pressures such as persistent inflation, elevated interest rates, rising unemployment and slowing growth would sink the country into deeper debt.

Report informs via Associated Press that treasurer Jim Chalmers announced that a surplus of 4.2 billion Australian dollars ($2.8 billion) was forecast for the fiscal year ending June 30. He also released details of his government’s economic blueprint for next year that aims to ease financial hardships of the most needy without stoking stubbornly high inflation.

High prices for commodities including iron ore, coal and gas, plus income tax revenue buoyed by an extraordinarily low jobless rate of 3.5%, helped deliver the first surplus since the global financial crisis tipped the Australian economy into the red in 2008.

Chalmers said the next two years were expected to be the weakest for global growth in more than two decades, apart from the global financial crisis and the first years of the COVID-19 pandemic.

“In this environment, inflation remains our primary economic challenge — it drives rates rises, it erodes real wages,” Chalmers told Parliament. “Which is why the budget is carefully calibrated to alleviate inflationary pressures, not add to them.”

The debt outlook has improved since the government released its interim forecasts in October, when a deficit of AU$36.9 billion ($25 billion) was expected this fiscal year.

Gross debt as a percentage of GDP is now forecast to peak at 36.5%, or AU$1 trillion ($680 billion), in 2025-26 — five years earlier and 10.4 percentage points lower than predicted in October.

But the economy is forecast to return to a AU$13.9 billion ($9.4 billion) deficit next year. That debt would more than double to AU$35.1 billion ($23.8 billion) in 2024-25.

Growth is expected to drop from 3.25% this year to a sluggish 1.5% next year under the weight of high interest rates and weak global economic conditions while unemployment was predicted to creep up to 4.25% from the current near-50-year low of 3.5%.