Australia's Final Budget Deficit Narrows to A$22.3 Billion
Australia closed the 2025/26 financial year with a A$22.3 billion deficit, smaller than forecast, helped by lower spending and higher tax receipts.
Australia recorded a final budget deficit of A$22.3 billion (US$15.65 billion) for the financial year ending June 2026, Treasury said on Monday, a smaller shortfall than earlier projections.
The Final Budget Outcome 2025/26 put the deficit at roughly 0.8% of gross domestic product, well below the A$28.3 billion gap forecast earlier in the year. The result follows a A$10 billion deficit in 2024/25, which had ended two consecutive years of surpluses.
Treasury attributed the improvement to reduced payments across a range of welfare programmes and stronger-than-expected tax receipts from businesses, along with investment income earned by pension funds.
Speaking at a press conference, Treasurer Jim Chalmers welcomed the outcome but cautioned that the fiscal outlook remains difficult. "Despite this very welcome improvement in the budget, we know that pressures are intensifying rather than easing," he said.
The government had earlier projected the deficit would widen to A$31.5 billion in 2026/27, though the fiscal backdrop has since deteriorated. A global bond rout has pushed yields sharply higher, increasing borrowing costs for governments.
Attention now turns to the Reserve Bank of Australia, which is widely expected to raise interest rates for a fourth time to 4.6% on Tuesday, as policymakers seek to contain persistent inflation and cool demand. The labour market has remained resilient, with the unemployment rate holding at 4.6%.