Australia's budget position ranks second among G20 nations

Australia's budget balance as a share of gross domestic product (GDP) was second among G20 nations last year, improving from 14th in 2021, according to the International Monetary Fund (IMF).

Australia's budget balance was -0.9% of GDP in 2023, surpassing advanced economies like Germany, Japan, the United Kingdom, and the United States.

Treasurer Jim Chalmers and minister for finance Katy Gallagher said the "remarkable improvement" was a testament to the government's responsible approach to budget management.

"Our responsible management is ensuring that fiscal policy is taking the pressure off inflation when it is at its highest," the ministers said.

"The Albanese government delivered Australia's first surplus in 15 years in 2022-23, achieving a $100 billion turnaround in the forecast inherited from the former government. A second surplus in next month's budget remains within reach."

The IMF reported that while overall primary deficits are expected to decrease, "substantial risks" to public finances remain.

The risks of fiscal slippages are especially high given that 2024 is the "Great Election Year," with elections in 88 economic areas representing more than half of the world's population.

"Support for increased government spending has grown across the political spectrum over the past several decades, making this year especially challenging, as empirical evidence shows that fiscal policy tends to be looser, and slippages larger, during election years," the IMF said.

Fiscal consolidation is needed in most countries to strengthen debt sustainability and financial stability, it added.

"While the pace of fiscal consolidation should be calibrated to strike a balance between fiscal risks and the strength of private demand, up-front actions are needed in many cases, especially where sovereign risks are elevated, and a credible medium-term framework is lacking," it said.

"Reforms are needed to contain rising spending pressures-for instance, through entitlement reforms in advanced economies with aging populations and improving the targeting and efficiency of social safety nets to support the most vulnerable populations."