Deloitte Access Economics published a report on Monday estimating the Australian budget deficit will increase to $33.5 billion in 2024-25, which is $5.2 billion worse than the $28.3 billion estimated in the Federal Budget.
The report highlights that the softer economic outlook will weigh on the government collecting taxes after the last two consecutive budget surpluses saw a boost from commodity prices and inflation.
As commodity prices have pulled back and inflation continues to moderate with migration levels stabilising, Deloitte sees the end of cyclical revenue windfalls.
Meanwhile, Australia does seem to have achieved a soft economic landing, but the federal fiscal position is under pressure.
If the Deloitte Access Economics’ deficit blowout is realised, it would represent a deterioration in the budget bottom line of more than $49.3 billion following the $15.8 billion surplus printed in 2023-24.
This would see Australia’s largest nominal contraction in the underlying cash balance on record.
Elsewhere, the Federal Budget will need to navigate Donald Trump's second term with proposed tariffs on U.S. imports, including 60% on goods from China, meaning Australia’s budget will not be immune given its reliance on commodity prices through company tax payments.
Given the make up of the Australian economy, it is more exposed to global commodity prices than most other developed economies.