SYDNEY, June 28 (Reuters) – Australia’s budget surplus for 2022/23 will exceed the A$4.2 billion ($2.81 billion) projected in May’s budget, but high inflation and global challenges will the domestic economy is “slowing significantly,” treasurer Jim Chalmers said Wednesday.
Strong job growth and massive mining profits will swell government coffers similar to the forecast during the federal budget, while spending restraints and A$40 billion in savings have also boosted budget outcomes.
“I can reveal that we expect the surplus to be larger than forecast in May,” Chalmers said in a speech to the Property Council of Australia. “In fact, we are in a significantly better position than we predicted.”
The Australian Labor government in May ran its first budget surplus in 15 years for the year to June 2023, a huge reversal from the projected deficit of A$37 billion last October.
But Chalmers said interest rate hikes by the Reserve Bank of Australia (RBA), which are now at their highest level in 11 years, and warnings that more tightening may be needed to push inflation towards the target, could hurt the economy will slow down.
“The 400 basis point rate hike since pre-election last year is the most significant tightening cycle the RBA has undertaken since the era of inflation targeting began,” the treasurer said. “And this, along with global challenges, will significantly slow down our economy.”
The Australian economy could fall to 1.5% in 2023/24 from 3.25% this fiscal year, he said.
Ahead of May inflation data to be released later on Wednesday, Chalmers said high inflation remains the biggest challenge for the economy, though he hoped it could return to RBA’s 2-3% target in 2024/25 of about 7% now.
“We expect (inflation) to stay higher than we’d like, longer than we’d like, but still in the right direction,” Chalmers said.
($1 = 1.4963 Australian dollars)
Reporting by Renju Jose in Sydney; Edited by Sam Holmes