Australia’s budget for FY24 indicates a slightly more expansionary approach compared to Fitch Ratings’ previous assessment in November 2023. The forecasted general government deficit is 1.2% of GDP, reflecting weaker fiscal metrics within the ‘AAA’ group and long-term structural challenges ahead.
Fitch Ratings states that Australia’s recent budget announcement will have a minor impact on the agency’s fiscal forecasts in the medium term. The budget indicates a slightly more expansionary approach than previously assumed by Fitch when it affirmed Australia’s ‘AAA’ rating in November 2023. The budget projects an underlying cash balance of AUD 9.3 billion for the fiscal year ending June 2024, representing 0.3 percent of GDP, an improvement over previous estimates.
The government plans to increase deficits in FY25 and FY26 to exceed previous projections, with the budget remaining slightly in deficit until FY35. Central government debt/GDP is expected to peak at 35.2% in FY27, slightly below the previous estimate of 35.4% in FY28. Fitch predicts better fiscal performance compared to budget projections due to conservative revenue estimates.
The report predicts a government deficit of 1.2% of GDP in FY24, with a revision to 1.4% for FY25. General government debt is projected to increase from 48% of GDP, compared to a median of 36% for ‘AAA’ sovereigns. Australia’s fiscal metrics have improved but still lag behind peers in the ‘AAA’ group. Long-term structural challenges remain for the country’s fiscal outlook.
