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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUSTRALIA
There were few surprises in the first budget of the new Labor government. It aimed to establish Labor’s economic credentials and redirected spending to its election promises. It is unlikely to impact the RBA outlook.
- As expected, 2023-24 GDP growth was revised down 1pp to 1.5%, driving a 1pp increase in the unemployment rate, but it returns to 2.25% the following year. Inflation should peak at 7.75% later this year, in line with the RBA’s projections, and then return to target in 2024-25. This results in positive real wage growth in 2023-24.
- Due to the $132.5bn windfall from commodities, weaker AUD and post-Covid demand recovery, the deficit and debt trajectories have improved since the Pre-Election Economic and Fiscal Outlook. The deficit is now forecast to be 1.5% of GDP in 2022-23 (-0.1pp from 2021-22) and then grow to 2% in 2024-25.
- It is this deficit growth, while GDP recovers, that concerned commentators and implies that difficult spending and taxing decisions will need to be made going forward to reverse the forecasted A$14.4bn widening of the deficit by 2024-25 and deal with its structural problems.
- Given the current significant economic uncertainties, Treasury’s forecasts are vulnerable and risks are skewed towards a larger deficit.
- Energy prices are forecast to rise 56% contributing 0.75pp to 2022-23 and 1pp to 2023-24 inflation. There was no relief in the budget despite election promises.
- In terms of details, there is A$9.7bn of new spending. 92% of the revenue windfall has gone into improving the deficit. Cost-of-living support has been restricted to election promises but won’t start until 2023.
- A housing accord has been formed with the private sector to build a million new homes in the 5 years from 2024.
Government underlying cash balance % GDP with projections
Source: MNI - Market News/The Commonwealth of Australia/Refinitiv
Budget October 2022 Economic Forecasts
Source: MNI - Market News/The Commonwealth of Australia/Refinitiv
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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