Australia's federal budget is on track for a deficit of $26.9bn this financial year and is not projected to return to balance until 2034-35, according to the mid-year economic and fiscal outlook (Myefo) released on Wednesday. The update breaks the Labor government's streak of two full-year budget surpluses, although the deficit is $1.3bn smaller than projected in May.
Treasurer Jim Chalmers and Finance Minister Katy Gallagher said the result is 'almost half the $47.1bn deficit we inherited for this year from our predecessors.' Cumulative deficits are $22bn worse over four years, with the deficit projected to increase to $46.9bn in 2025-26 before gradually declining.
The economic statement attributed the downgrade to higher interest rates, cost-of-living pressures, and global economic uncertainty weighing on the economy more than anticipated. Economic growth is expected to rise from 1.4% in 2023-24 to 1.75% in 2024-25, a downgrade from May's forecast of 2%. Inflation is projected to remain at 2.75% for the next two years, though the Reserve Bank expects it to exceed 3% in some quarters of 2025-26.
Net overseas migration was revised up to 340,000 from 260,000, reflecting sluggish departures. The update also reveals $5.5bn in 'decisions taken but not yet announced' over four years, which Chalmers described as 'relatively small' and could include pre-election sweeteners.
