The International Monetary Fund has projected that total government revenue – including federal, state, and local sources – will hit a record 36.4 per cent of gross domestic product (GDP) this year before slipping slightly to 36 per cent next year.
In its latest Fiscal Monitor, released this week, the IMF also forecast that government expenditure will climb to 38 per cent, up from 37.2 per cent last year, while gross debt is set to reach 49.3 per cent in 2024.
However, the fund’s optimism on revenue is tempered by a cautious inflation outlook, with the fund this week predicting inflation in Australia would dip to 3 per cent by the end of 2024, supported by initiatives like energy rebates, before rising to 3.6 per cent by the end of 2025.
If this 3.6 per cent inflation rate materialises, the IMF said Australia will globally be outpaced only by the Slovak Republic where inflation is projected to hover just below 5 per cent.
But rather than confront these inflation concerns, Treasurer Jim Chalmers issued a statement on Thursday to extol the Albanese government’s “responsible budget strategy”, claiming it has catapulted Australia to the top ranks of global economies in fiscal management for 2024.
“Australia is expected to have the third strongest budget balance as a share of GDP among G20 countries in 2024, and up from 14th in 2021 under the Coalition according to the IMF Fiscal Monitor,” Chalmers declared.
“This is a big vote of confidence in Labor’s management of the nation’s finances.”
Chalmers further noted that Labor’s “responsible economic management” is pivotal in the fight against inflation.
“The government’s budget strategy strikes the right balance between fighting inflation, rolling out responsible cost-of-living relief, supporting growth in our economy and strengthening public finances,” the Treasurer said.
Yet, Labor’s economic management record has recently faced intense scrutiny.
Last month, GSFM’s Stephen Miller slammed the government for complicating the RBA’s inflation containment efforts, arguing they are being “frustrated” by “counterproductive policies” amid a backdrop of “tortured political commentary”.
At the time, Miller said “fiscal laxity has exacerbated inflation pressures and led to a delay of interest rate relief”.
Similarly, CBA’s Gareth Aird emphasised that while the RBA’s interest rate hikes have curbed private demand, they cannot rein in the growing public sector. He called the rise in public expenditure “extraordinary” as the government sector continues to expand its share of the economy amid rising interest rates.
Despite these criticisms, Chalmers stated on Thursday that the IMF’s observations serve as an endorsement of “Labor’s responsible economic management”.
“We’ve delivered two surpluses at the same time as we’ve rolled out responsible cost-of-living relief, including tax cuts for every taxpayer, energy bill relief for every household, cheaper medicines, cheaper childcare and the first consecutive real increases to the maximum rates of Commonwealth Rent Assistance in three decades,” he said.
“Our economic plan is all about easing the cost of living and fighting inflation at the same time as we lay the foundations for a stronger economy for the future, and back-to-back budget surpluses help on each of these fronts.”
Currently, Treasurer Chalmers is in Washington, engaging with key economic ministers and central bank governors from the world’s largest economies at the G20, IMF, and World Bank annual meetings.
In a statement on Wednesday, he highlighted that Australia faces the same volatility and vulnerabilities as the global economy, particularly with escalating conflicts in the Middle East threatening to spike oil prices and cloud the economic outlook.
“This is a really critical time to confer with colleagues and counterparts,” Chalmers said.
“There will be in‑depth discussions on the global economy, the energy transformation, economic security and reform of our multilateral institutions.”
