Fiscal Update Tomorrow, Likely Improved But Debt Servicing Higher

The Mid-Year Economic and Fiscal Outlook (MYEFO) is published tomorrow with Treasurer Chalmers giving a press conference in the late morning according to Treasury. Chalmers has said that it will be a “traditional” update with revised forecasts and report on any new spending that has come up but there won’t be “big, new initiatives”. The MYEFO will continue to work towards avoiding any additional inflationary pressures stemming from fiscal policy so as not to make the RBA’s job harder.

• In May, the government estimated the FY24 deficit at $13.9bn but the budget was $9.1bn better than expected in the financial year to October. Many economists expect the MYEFO to show a predicted surplus for FY24.
• Finance Minister Gallagher has already announced that there will be $9.8bn of additional savings and spending reprioritisations which brings the total since the start of the government’s term to $49.6bn.
• The growing issue for the budget is the interest bill on the debt due to rising rates. It is estimated that it will be an additional $80bn over the decade ahead making it the fastest growing expense pushing the NDIS into second place. According to The Australian the average long-term rate for new borrowing will be revised up 1.3pp to 4.7% from May’s forecast. Gross debt-to-GDP is still expected to be revised down over the forecast horizon.
• Continued robust jobs growth and resilient commodity prices are likely to result in an upward revision to the current financial year revenue estimates.