Australia had the second strongest budget balance as a share of gross domestic product among G20 countries last year, something the Albanese government attributes to a “responsible approach” to budget management.
Australia’s overall budget balance, which combines the fiscal positions of both the Commonwealth and state governments came in at -0.9 percent of GDP in 2023, only bettered by Canada’s budget position of -0.6 percent.
Up from 14th equal position in 2021, Australia now sits ahead of advanced economies like Germany, Japan, the United Kingdom and the United States.
In a joint statement, Finance Minister Katy Gallagher and Treasurer Jim Chalmers said achieving the balance was helped by a surplus.
“The Albanese Government delivered Australia’s first surplus in 15 years in 2022–23, achieving a $100 billion turnaround in the forecast inherited from the former government. A second surplus in next month’s budget remains within reach,” they said.
“Our responsible management is ensuring that fiscal policy is taking the pressure off inflation when it is at its highest.”
Impacts on Australia-China Trade
The IMF predicts global financial instability due to slowing growth in China which could have negative consequences for Australia given it counts China as its biggest market for real estate and investment.Mr. Chalmers said the topic “has been a big feature of our discussions as we put the budget together.”
“The property sector in China has been a really significant factor in the slowing of the Chinese economy ... And obviously, given the structure of our economy and our trading relationships with China, we’re not immune from the way that the Chinese economy has slowed considerably,” Mr. Chalmers told ABC’s Breakfast Show.
With the global economy in recovery mode from a pandemic, ongoing wars, and subsequent high inflation, the IMF has been pushing a message of fiscal austerity in countries they say, “continue to struggle with the legacies of high debt and deficits while facing new challenges.”“The pace of fiscal consolidation should be calibrated to strike a balance between fiscal risks and the strength of private demand,” the IMF said.
Noting that 2024 is a year heavy with national elections (88 globally), the IMF doubled down on the need to reign in spending, despite calls to the contrary.
“Support for increased government spending has grown across the political spectrum over the past several decades, making this year especially challenging, as empirical evidence shows that fiscal policy tends to be looser, and slippages larger, during election years,” the IMF said.
The statement from Ms. Gallagher and Mr. Chalmers echoed the IMF’s sentiment.
“This is consistent with the government’s approach to ensuring our budget settings are right for the evolving circumstances, including the much smaller revenue upgrades expected in the May budget and the shift in the balance of risks in our economy from inflation to growth,” they said.
“Like our first two budgets, this year’s budget will continue to put a premium on what’s responsible, affordable, and methodical.”
