Australia reports big commodity windfall in final budget result

(Bloomberg) – Australia reported a significant improvement in fiscal 2022 fiscal outturn, even as Treasurer Jim Chalmers dismissed prospects of the books returning to the black over the next four years.

A spike in commodity prices following Russia’s invasion of Ukraine generated a windfall in government coffers, with the deficit rising to AUD 32 billion ($21 billion), or 1.4% of GDP, until June. Wednesday’s result was an improvement of A$47.8 billion over forecast.

Asked by reporters about the chances of the budget returning to surplus in the near term, Chalmers said that was unlikely, even compared to forward estimates.

“The backdrop for the October budget will be a deteriorating global economy, increasing pressures on spending and pressures on Australians,” the treasurer told a news conference in Canberra.

Chalmers is in an awkward position because newly appointed treasurers traditionally like to highlight the poor state of government books to give themselves room to make tough decisions and hurt their predecessors.

But Chalmers’ task is more complicated because while the revenue boost is likely to prove temporary, it leaves the budget in a much better position than had been expected.

Chalmers is due to present its first budget on October 25. His first few months in office were rocked by accelerating inflation that prompted the central bank to raise interest rates by 2.25 percentage points since May.

The treasurer signaled his intention to strengthen the country’s fiscal position, saying next month will begin “the difficult task of longer-term fiscal repair.”

Commonwealth Bank of Australia’s Gareth Aird said signals from Chalmers so far looked promising.

“The budget will be important for monetary policy,” said Aird, head of Australia’s economy at the CBA, the country’s biggest lender. “The tone of this government is completely opposite to what the UK has done. If they don’t plan to spend, it would require a slower pace of tightening.

Today’s final budget result showed an increase of A$27.7 billion in tax revenue, amid high commodity prices, and a drop of A$20.1 billion in government payments on the period 2021-2022.

Australia has been one of the few beneficiaries of Russia’s aggression against Ukraine, which has sent commodity and energy prices soaring, pushing its terms of trade to new heights. peaks. This, combined with unemployment near its lowest level in 50 years, has inflated tax levies and reduced social benefits.

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