Budget overview

The Government’s economic plan has helped Australia weather the biggest economic shock since the Great Depression, outperforming the performance of all major advanced economies.

The economy has rebounded strongly, the labour market is robust and Australia’s health outcomes are among the best in the world.

This Budget marks the next stage in leading Australia's strong economy into the future.

Australia's plan for a stronger future is:

delivering more jobs and working towards unemployment below 4 per cent

investing in stronger defence, borders and security

continuing record investments in health, education, women’s safety and other essential services

delivering cost of living relief for Australians and supporting small businesses

investing in the roads, rail, dams and renewable energy technology, that will build our future

Budget at a glance

A stronger economy is helping to repair the budget

This Budget demonstrates the fiscal dividend of a strong economy, with more Australians in work and fewer Australians on welfare, flowing through to a significantly improved fiscal outlook.

The strength of the economy, and in particular the labour market, combined with higher near-term commodity prices, has driven large upward revisions to tax receipts and reductions in unemployment benefit payments.

Since MYEFO, the estimated underlying cash balance has improved by a substantial $103.6 billion over the 5 years to 2025‑26. This Budget projects a halving in the deficit to 1.6 per cent of GDP by 2025‑26 before falling to 0.7 per cent of GDP by the end of the medium term. This improvement will flow through to lower debt.

Underlying cash balance

This chart shows the underlying cash balance as at the 2022-23 Budget and the 2021-22 MYEFO. At the 2022-23 Budget, the underlying cash balance is expected to improve from a deficit of 3.4 per cent of GDP in 2022-23 to a deficit of 0.7 per cent of GDP at the end of the medium term. This compares to a deficit of 4.4 per cent of GDP in 2022-23 and a deficit of 1.8 per cent of GDP at the end of the medium term at the 2021-22 MYEFO.

Budget aggregates
  Estimates  
  2020‑21 2021‑22 2022‑23 2023‑24 2024‑25 2025‑26 Total(a)
Underlying cash balance ($b) -134.2 -79.8 -78.0 -56.5 -47.1 -43.1 -224.7
    % of GDP -6.5 -3.5 -3.4 -2.4 -1.9 -1.6  
Gross debt (% of GDP) 39.5 39.5 42.5 44.6 44.9 44.7  
Net debt (% of GDP) 28.6 27.6 31.1 32.6 33.1 33.1  

(a) Total is equal to the sum of amounts from 2022‑23 to 2025‑26.

Economic and fiscal strategy

Ensuring Australia is well placed to respond to future shocks

Having achieved the objective of low unemployment, the Government has transitioned to the second stage of its economic and fiscal strategy.

With the unemployment rate expected to fall below 4 per cent this year, the first time in nearly half a century, the time for emergency fiscal support has passed.

The Government is turning the corner on debt and setting a course to reduce debt over the medium term as we begin to rebuild fiscal buffers to manage future shocks. Gross debt as a share of GDP is expected to peak at 44.9 per cent at 30 June 2025, 5.4 percentage points lower and 4 years earlier than projected at MYEFO.

Gross debt is then projected to fall steadily to 40.3 per cent of GDP by the end of the medium term, 9.6 percentage points or $236 billion lower than at MYEFO.

Despite the impact of COVID–19, the Australian Government continues to have lower debt as a share of its economy than many other advanced economies and is one of only nine nations with a AAA credit rating from all three major ratings agencies.

Gross debt

This chart compares projections of gross debt as a share of GDP at the 2022-23 Budget and 2022-21 MYEFO. In the 2022-23 Budget, gross debt is expected to peak at 44.9 per cent of GDP at 30 June 2025, it is projected to decline to 40.3 per cent of GDP by the end of the medium term. Gross debt as a share of GDP is expected to be significantly lower over the entire forward estimates and medium term than at MYEFO.

International comparison of gross debt

This chart compares the gross debt to GDP ratios of the Australian Government and the G7 economies in 2022. The Australia Government has the lowest gross debt to GDP ratio of 40 per cent followed by Germany, Canada, the UK, France, United States and Italy. Japan had the highest gross debt to GDP ratio at 252 %.

Global economic outlook

Australia is well placed to meet the challenges ahead

Higher global oil, gas and food prices as a result of Russia's invasion of Ukraine are adding to high inflationary pressures and risk dampening consumer spending and hampering investor and business sentiment globally.

As a result of the invasion, forecasts for world GDP have been downgraded by ¾ of a percentage point and forecasts for global inflation have been revised up 1½ percentage points in 2022.

These global inflation risks increase the possibility that inflation expectations become unanchored, and so increase the challenge central banks face in trying to contain inflation while avoiding a policy induced ‘hard landing’.

Recent COVID‑19 outbreaks in China’s port cities and manufacturing regions have also demonstrated the continued risk to already strained supply chains from the pandemic.

Nonetheless, the resilience of the Australian economy throughout the pandemic demonstrates that the economy is well placed to meet these challenges and absorb the effects of the conflict and associated disruptions.

Output and employment in Australia have recovered from the pandemic by more than in any major advanced economy. Our labour market is dynamic with the unemployment rate falling to a near 50 year low. While inflation has reached multi-decade highs globally, inflation in Australia is less than half of that in the US, and well below that of the euro area, Canada and the United Kingdom.

Employment relative to pre-pandemic level, Australia and G7

This chart shows the percentage change in employment levels for G7 countries and Australia relative to pre-pandemic levels. This chart shows that Australia has had the strongest recovery in employment, relative to the G7 countries, since the beginning of the pandemic.

Real GDP relative to pre-pandemic level, Australia and G7

This chart shows the percentage change in  real GDP G7 countries and Australia relative to pre-pandemic levels. These charts show that Australia has had the strongest recovery in real GDP, relative to major advanced economies, since the beginning of the pandemic.

Domestic economic outlook

The economy has recovered strongly from the pandemic, but will continue to face challenges

Australia’s economic recovery has been remarkable and has consistently outperformed expectations. Output and jobs have returned to their pre-pandemic level faster than in any major advanced economy. Under the Government’s economic plan, there are more Australians in work than ever before with the unemployment rate falling to its equal lowest level in 48 years which is expected to see wages pick up to their fastest pace in almost a decade.

Australia’s high vaccination rates, combined with the ability of consumers and businesses to adapt to ongoing community transmission, has seen the economic impacts of successive COVID-19 outbreaks moderate over time. The $343 billion in health and economic support provided by the Government during the pandemic laid the foundations for a strong economic recovery.

Australia’s strong economic recovery is expected to continue with broad based growth in consumption, investment and exports alongside a stronger labour market, rising wages, income tax cuts, and stronger household income growth.

Russia’s invasion of Ukraine, the ongoing pandemic, and resulting inflation pressures present risks to families and businesses. Nonetheless, the resilience of the Australian economy throughout the pandemic demonstrates that the economy is well placed to adapt to these new developments.

Real GDP

This chart shows real GDP levels for the 2020-21 Budget and 2022-23 Budget from the June quarter of 2016 to June quarter of 2024, indexed to the December quarter of 2019. The chart shows that the real GDP outcomes were above the Budget 2020-21 forecasts. Real GDP is forecasted to remain above the 2020-21 Budget profile over the current forecast period, to the June quarter of 2024.

Unemployment rate

This chart shows the unemployment rate from June 2016. It shows that the rate had fluctuated around 5 to 6 per cent before increasing drastically from the onset of the pandemic, peaking at 7.4 per cent in July 2020, and then recovering before falling quickly back to around 5 per cent by mid-2021. It is then forecast to fall further with the unemployment rate expected to be just 3 and three quarters of a per cent by the June quarter of 2023, compared with the 4 and three quarters of a per cent forecast in the 2021-22 Budget.

Keeping Australians safe

 

Helping Australians with the cost of living

 

Building Australia and strengthening our regions

 

A workforce for now and for the future

 

Creating opportunities for women to fulfill their potential

 

Guaranteeing the essentials