Senator the Hon. Simon Birmingham
Minister for Finance
Leader of the Government in the Senate
Senator for South Australia
The Hon. Josh Frydenberg MP
Date: Tuesday, 29 March 2022
The Government’s plan for a stronger future is working.
The Australian economy has outperformed all major advanced economies, experiencing a stronger recovery in output and employment compared to pre-pandemic levels.
Economic growth forecasts have been revised upwards, driven by stronger-than-expected momentum in the labour market and consumer spending.
Real GDP is expected to grow by 4¼ per cent in 2021‑22, 3½ per cent in 2022-23 and 2½ per cent in 2023-24.
The unemployment rate is at 4 per cent and this Budget will see it go even lower delivering more jobs and higher wages.
The unemployment rate is forecast to reach 3¾ per cent in late 2022, nearly 3 percentage points below the Budget forecast from 2 years ago and the lowest rate in close to 50 years.
The strong labour market is expected to see wages growth accelerate to its fastest pace in almost a decade with wage growth forecast to increase from 2¾ per cent in 2021‑22 to 3¼ per cent in 2022-23.
The 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 without increasing taxes.
Since MYEFO, the underlying cash balance has improved by a substantial $103.6 billion over the 5 years to 2025‑26.
The Budget shows the deficit more than halving 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 sees the fastest and largest improvement in the budget bottom line in more than 70 years.
Consistent with the Fiscal Strategy, the stronger economy and smaller deficits are expected to see gross debt as a share of the economy peak at 44.9 per cent of GDP at 30 June 2025, 5.4 percentage points lower and 4 years earlier than at MYEFO.
Gross debt is then projected to fall to 40.3 per cent of GDP by the end of the medium term, 9.6 percentage points or $236 billion lower than at the end of the medium term in the 2021-22 MYEFO.
This demonstrates the dividend of a clear Economic and Fiscal Strategy that has guided us through the pandemic and delivered a stronger economy and full employment.
It is also an important step in the longer-term task of steadily reducing debt and rebuilding fiscal buffers, which will ensure Australia remains well placed to respond to future shocks.
Despite having faced the largest economic shock since the Great Depression, our debt to GDP levels, even when they peak, are still low by international standards, below all major advanced economies and less than half that in the United States and Japan.
The Government’s economic plan is working with Australia one of only 9 countries to maintain a AAA credit rating from major ratings agencies.
The 2022‑23 Budget sets out the next stage of our plan for a stronger future.