Published On: December 13th, 2023
Figure 1-Australian Federal Budget Deficit | In-Picture Jim Chalmers
The Mid-Year Economic and Fiscal Outlook 2023-24 (MYEFO 2023-24) updated the previously announced Australian Federal Budget Deficit of $13.9 Billion to only $1.1 Billion. Treasurer Jim Chalmers released the Australian Federal Budget for 2023-24 last Wednesday.
Experts have tied the short-term reason behind this surplus to higher-than-expected tax revenue generated over the financial year. However, this 2nd successive surplus generated by the Labor government has also led to expectations of budget re-allocations.
Strong Positives for Industries and Sectarian Investments
While sharing the updated Australian Federal Budget deficit, Treasurer Jim Chalmers mentioned that a consolidated end-of-year surplus is “within striking distance” and that there will be a potential $64.4 billion surplus from tax revenue over the next four years.
The key drivers to this surplus include –
- High commodity prices lead to better profit realisation for enterprises and subsequent taxation
- Low unemployment has helped generate positive returns from industrial and sectarian investments while reducing costs for unemployment support
- Increasing non-mining corporate profits has opened new doors for an otherwise Australian economy heavily reliant on the mining sector
The government’s push towards green energy, clean-tech and other future-ready sectors has paid off for both short and long-term growth prospects.
Despite the surplus, the government will continue their corporate and industrial tax cuts to keep accelerating growth in non-mining sectors and incentivise future tech ventures and products.
Banking on Global Economy Trends
The MYEFO 2023 2024 announcement also included vital insights, including slower GDP growth pegged at 1.75% and real wage growth at 0.25%.
Experts have commented that the 2nd successive Australian Federal Budget surplus has not positively impacted the high inflation rates. Further, it remains a concern yet to be addressed since the global economy expects a financial recession in 2024-25.
However, MYEFO 2023 has forecasted higher GDP growth and real wage growth for 2024-25, backed by continued investments into new industrial sectors for job creation. These forecasts are also expected to help reduce unemployment, which is expected to rise to 4.25% for this financial year.
Key Takeaway for Investors
- The government will continue with Stage 3 of tax cuts for industrial and corporate investments.
- Added importance to future-proof industry sectors like renewable energy and clean tech, among others, to negate over-emphasis on the core mining sector.
- Tax concessions for the real estate industry, especially for property investors.
- An almost positive Australian Federal Budget Deficit shows financial resilience and stability ahead of a forecasted global economic recession.
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