Australia's annual budget: the 2024–25 budget strikes the right balance between keeping pressure off inflation, delivering cost-of-living relief, supporting sustainable economic growth and strengthening public finances

Global uncertainty, high but moderating inflation, and higher interest rates are contributing to cost-of-living pressures and combining to slow the economy.

The global transformation to net zero and rapid shifts in the geostrategic landscape are creating new opportunities and challenges for Australia’s economic prosperity and security.

While many Australians remain under pressure, Australia is better placed than most economies to manage these challenges and become the beneficiaries of change.

Following a surplus in 2022–23, a second is expected in 2023–24, which would be the first back-to-back surpluses in nearly two decades.

The Budget forecasts lower gross debt-to-GDP and lower inflation, which is expected to return to the RBA’s target band earlier than previously expected.

Global growth is expected to remain subdued over the next few years as the effects of high inflation, restrictive macroeconomic policies, geopolitical tensions, and challenges in the Chinese economy weigh on the outlook.

Tackling inflation remains the primary focus but, as inflationary pressures abate and labor markets soften, the global policy focus will increasingly shift to managing risks to growth.

Inflation remains elevated, but has moderated to less than half of its peak in 2022.

Annual inflation has moderated more quickly than forecast at the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO) and is expected to be lower in 2023–24.

The Government’s responsible cost-of-living relief measures of energy bill relief and Commonwealth Rent Assistance are estimated to directly reduce headline inflation by 0,5% in 2024–25 and are not expected to add to broader inflationary pressures.

This could see headline inflation return to the RBA’s target band by the end of 2024, slightly earlier than expected at MYEFO.

The Government delivered a $22.1 billion surplus in 2022–23. A second surplus of $9.3 billion (0.3 per cent of GDP) is expected in 2023–24, an improvement of $10.5 billion since MYEFO.

A deficit of $28.3 billion is forecast in 2024–25. Over the six years to 2027–28, the underlying cash balance is stronger in every year compared to PEFO and has improved by a cumulative $214.7 billion.

Gross debt as a share of the economy is projected to be lower than MYEFO in every year of the forward estimates and medium term.

This Budget delivers further cost-of-living relief, with tax cuts to all 13.6 million taxpayers.

The Government’s tax changes deliver bigger tax cuts for low- and middle-income Australians in a way that does not add to the inflation outlook.

The Budget also provides energy bill relief for all households, further increases to Commonwealth Rent Assistance, financial support for students and cheaper medicines.