Australia recorded a final A$22.3 billion budget deficit for the year to June 2026, equal to about 0.8% of GDP and below an earlier A$28.3 billion forecast. Treasury attributed the improvement to lower welfare spending and stronger tax receipts.
The result compares with a A$10 billion deficit in 2024/25, which ended two years of surpluses. Treasurer Jim Chalmers said that, despite the improvement, pressures were intensifying rather than easing.
Earlier this year, the government forecast the deficit would widen to A$31.5 billion in 2026/27. Since then, a global bond selloff has driven yields higher and increased borrowing costs for governments. The Reserve Bank of Australia was widely expected to raise interest rates for a fourth time, to 4.6%, on Tuesday to curb sticky inflation and slow demand; unemployment was 4.6%.
