By Stephen Halmarick, Chief Economist at CBA:
Key Points:
- A stronger economy than that expected at the time ofthe March 2022/23 Budget is helping deliver a better-than-expected budget outcome for 2021/22 –as we anticipated.
- As signalled by the new Treasurer, it will be important for fiscal policy to tighten along with monetary policy to help the economy manage through this period of higher inflation. Full details of the government’s fiscal strategy will be provided in an updated 2022/23 Budget on 25 October.
- The 2021/22 Budget deficit could now come in approx. $A40bn lower than the most recent estimate of $A79.8bn, with the deficit to May 2022 almost half as large as previously expected.
- We would also expect the improved starting point for the Budget to carry forward into 2022/23, holding out hope that the deficit for the new financial year could be lower than the current $A78bn estimate. However, this positive outlook may be negatively impacted by lower commodity prices in the year ahead and a slower economy as interest rate hikes bite.
A stronger economy means a lower budget deficit
The new Treasurer, Dr Jim Chalmers, has set 25 October as the date for a fresh 2022/23 Budget, which will update the budget position, outlook and all the key economic variables that were contained in the original 2022/23 Budget of the previous government.
Advertisement
