Australia’s budget position is more fragile than thought

BMI—A Fitch Solutions Company—has published an analysis of the federal budget, which forecasts that Australia’s budget balance will fall into deficit in FY2025 (July to June) as “the government increases spending in response to the persistent cost-of-living crisis”.

BMI forecasts a deficit of 1.0% and 0.5% in FY2025 and FY2026, respectively.

“For FY2025, we forecast that the UCB [underlying cash balance] will record a deficit of 1.0% of GDP”, BMI noted. “This shortfall is attributed to policy efforts to alleviate the financial strain on citizens caused by the cost-of-living crisis and still high (albeit declining) interest rates”.