From the very first Albanese Labor Government budget the national electorate was cautioned that the newly minted annual budget surplus would not last if adverse global and domestic conditions continued.
Three years later MYEFO 2024-25 merely confirms that a deficit has returned for a projected period of four years, falling back to 1 per cent of GDP by the fourth year 2027-28.
A brief look at the projected economic and fiscal outlook.....
AUSTRALIAN BUDGET 2024-25, MID-YEAR ECONOMIC AND FISCAL OUTLOOK 2024–25 Updated economic and fiscal outlook (MYEO), excerpt, 18 December 2021:
Updated economic and fiscal outlook
The impact of higher interest rates, cost-of-living pressures and global economic uncertainty has weighed on the Australian economy more than anticipated. Despite these difficult circumstances, the Australian economy has outperformed many advanced economies and is on track for a soft landing. The economy has continued to grow and inflation has moderated substantially. In the labour market, more than a million jobs have been created since May 2022, the participation rate is near record highs, real wages and household incomes are growing again, and the gender pay gap is the narrowest it has ever been. Business investment is at its highest level since the early 2010s.
Economic growth in Australia is expected to increase from 1.4 per cent in 2023–24 to 1¾ per cent in 2024–25, and then to 2¼ per cent in 2025–26. The pick-up in growth is expected to be supported by a gradual recovery in household consumption. The Government’s cost-of-living tax cuts, together with the anticipated easing in inflationary pressures and continuing employment and wage growth are expected to drive growth in real household disposable incomes in 2024–25.
Inflation has moderated substantially in the Australian economy across both headline and underlying measures. Inflation returned to the RBA’s target band for the first time since 2021 in the September quarter 2024. This was supported by the Government’s cost-of-living relief in the 2024–25 Budget, which is expected to directly reduce annual inflation by ½ of a percentage point in 2024–25.
Underlying inflation fell by 0.5 percentage points in the September quarter to its lowest level in almost three years. The easing of underlying inflation has largely been driven by the normalisation of goods price inflation. Services inflation has also moderated from its peak. Inflation is expected to sustainably return to the RBA’s target band around the end of 2025.
Over a million jobs have been created in the Australian economy since the middle of 2022. Most of these gains in employment are expected to be preserved, with employment growth expected to remain positive but moderate over time. Labour force participation is forecast to remain near its peak. The unemployment rate is low by historical standards and is expected to remain comparatively low over the forecast period, rising modestly to 4½ per cent by June 2025.
Nominal wage growth has eased but is expected to remain above its 10-year pre-pandemic average of 2.7 per cent. Real wages are expected to grow over the forecast period due to a combination of solid wage growth and moderating inflation.
Investment will support growth in the economy in the period ahead, with business investment forecast to remain at around decade highs and dwelling investment expected to pick up.
While growth in public demand remains below its five-year pre-pandemic average, it has played an important role in ensuring the Australian economy remains on track for a soft landing. Without the contribution of public demand in the September quarter, growth in the economy would have been much weaker. State and local government spending was the major driver in public final demand.
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After recording the first back-to-back surpluses in almost two decades and the largest nominal back-to-back surpluses on record, a deficit of $26.9 billion is forecast for 2024–25. This is $20 billion better than the deficit forecast at the PEFO and an improvement on the 2024–25 Budget.
This MYEFO shows an improvement in the underlying cash balance by around $200 billion over the six years to 2027–28, relative to the PEFO. Gross debt is significantly lower, expected to stabilise at 36.7 per cent of GDP, 8.2 percentage points lower than the peak at the PEFO. As a share of the economy gross debt is lower in every year relative to the PEFO. ....
The full 2024-25 MYEFO can be read and downloaded at https://budget.gov.au/content/myefo/download/myefo2024-25.pdf
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