According to the International Monetary Fund’s (IMF) latest fiscal monitor, Australia boasts the second strongest overall budget balance among G20 nations, surpassed only by Canada. The report, which was released on a Wednesday night, indicated that Australia’s budget deficit was just -0.9% of its GDP in 2023, a close follow to Canada’s -0.6%. This represents a significant improvement for Australia to second rank, which ranked 14th in 2021 and seventh in 2022, trailing behind countries like Korea, Russia, and Saudi Arabia.
Australian Treasurer Jim Chalmers and Finance Minister Katy Gallagher celebrated this as a “remarkable achievement,” highlighting the strides in budget management since their tenure began. They noted that their fiscal policies have helped alleviate inflationary pressures during a peak period. The ministers also pointed out that the Albanese government had delivered Australia’s first budget surplus in 15 years for the fiscal year 2022-23, marking a $100 billion improvement from the forecasts left by the previous administration. They remain optimistic about achieving a second consecutive surplus in the upcoming budget.
While Australia’s budget balance is a key indicator of economic management, its net debt ratio also stands out, amounting to 28.3% of GDP in 2023 and ranking fourth among G20 nations. Despite not reaching the economic highs of 2011, when then-Treasurer Wayne Swan was named the world’s best by Euromoney magazine, Australia’s economic performance post-Covid-19 remains robust compared to many international peers.
However, the IMF projects a slight dip for Australia, forecasting it to fall to fourth place in 2024 with a general government balance of -1.3% of GDP. The IMF expects Canada, Korea, and even Argentina to outperform Australia in this regard, despite Argentina’s ongoing crises.
Amid global economic stabilization, the IMF warned that many countries would continue grappling with the dual challenges of high debt and deficits while confronting new hurdles. The IMF advocated for further fiscal tightening to assist the global economy in the final stages of disinflation. It also highlighted potential risks from China’s economic slowdown, particularly due to issues in its property sector, which could impact global growth and pose fiscal challenges for countries with significant economic ties to China.
Treasurer Chalmers emphasized the importance of China in Australia’s fiscal strategy, noting the significant influence of the Chinese market and the current economic slowdown on Australia’s economic outlook.
The IMF’s report also marked 2024 as a critical year due to numerous global elections, labeling it the “Great Election Year.” With elections scheduled in 88 economies, covering over half of the global population and GDP, the IMF predicted that fiscal policies might become more expansive and less stringent due to political pressures, a trend supported by decades of empirical evidence.
Overall, while Australia’s economic position is strong, the evolving global landscape and upcoming domestic and international political events could introduce new variables into the economic equation, requiring careful management and strategic foresight.
