The federal government received a big tick from the International Monetary Fund for having the second-strongest budget balance among G20 countries during 2023.
An IMF Fiscal Monitor report said the government had jumped from equal 14th in 2021 to No.2 for balancing budgets.
This means Australia is ahead of economies such as Germany, Japan, the UK and the US.
Treasurer Jim Chalmers and finance minister Katy Gallagher issued a joint statement to mark the release of the IMF’s report.
“The calendar year data from the IMF combines the fiscal positions of both the Commonwealth and state and territory governments,” the joint statement says.
“Our responsible management is ensuring that fiscal policy is taking the pressure off inflation when it is at its highest.
“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 Fiscal Monitor provides insights into the IMF’s thinking about where global economic trends have been heading after the coronavirus pandemic savaged economies across the globe.
“Four years after the COVID-19 pandemic outbreak, fiscal deficits and debts are higher than prepandemic projections,” the IMF report says.
“Higher interest rates pushed up interest expenses, while spending on social benefits, subsidies, and transfers was buoyed by the extension of support measures enacted in response to the pandemic and energy price shocks.”
It notes that various economies introduced measures to cut taxes and increase social welfare spending to assist individuals and businesses through the pandemic.
“These initiatives were only partially offset by revenue gains from past inflation as inflation surprises waned and tax brackets caught up with wage growth,” the report says.
“Financing for most low-income developing economies remained scarce, determining the evolution of fiscal balances.”
The IMF also says it expects overall primary deficits to narrow to 4.9% of gross domestic product during 2024.
“However, substantial risks to public finances remain, and resuming fiscal policy normalization will require significant efforts against several headwinds,” the report says.
“The risks of fiscal slippages are particularly acute given that 2024 is what is being called the ‘Great Election Year’: 88 economies or economic areas representing more than half of the world’s population and GDP have already held or will hold elections during the year.”
Shadow minister for finance Jane Hume said that the ranking Australia achieved in the IMF rankings was more likely the result of factors other than prudent fiscal management.
“Labor can thank high commodity prices and the bracket creep that has been stolen from hardworking Australians for this result,” Hume said.
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