Invest
Budget could be $200bn better off despite stimulus spending
A near record-high rebound in employment, business profits recovering and asset price booms are predicted to see Australia’s budget rebound by $200 billion even with an increase in government spending, an industry expert has revealed.
Budget could be $200bn better off despite stimulus spending
A near record-high rebound in employment, business profits recovering and asset price booms are predicted to see Australia’s budget rebound by $200 billion even with an increase in government spending, an industry expert has revealed.

With the budget predicted to be a tax sweetener for voters ahead of a federal election, analysis by UBS has revealed that it is unlikely to have an impact on Australia’s bottom line.
UBS economist George Tharenou predicts a more rapid than expected decline in JobSeeker recipients, led by a rise in employment and strong commodity prices which are leading to a faster than expected recovery.
“If the momentum continues for the rest of 2020-21, the deficit will be up to $50 billion smaller than expected. However, we allow for a conservative forecast and new policies, so we forecast the budget will present a $35 billion improvement,” Mr Tharenou said.
The economist pointed to the strong employment-to-population ratio, which is nearing record highs, as well as a business profits and asset prices boom, which Mr Tharenou opined has limited the long-term impact of the economic downturn.

“Hence, it’s plausible the budget will project a return to balance in 24/25, with a cumulative improvement of $200 billion across the profile,” he said.
Westpac chief economist Bill Evans agrees, highlighting 2021 will be a big year for stimulus despite Australia’s stronger than expected job figures.
“The labour market needs to remain “tight” for some time before the upward pressure builds on wages. So, while the unemployment rate might now be forecast to reach 4.5 per cent by mid-2023, it is still 0.5 per cent away from even reaching full employment and those ‘tight’ conditions,” Mr Evans said.
He noted that policymakers will be looking for strong wage growth before they look to reduce stimulus, but pointed out this is unlikely until the second half in 2024.
“There may well be pockets of wage pressure in 2022 as closed borders squeeze labour supply in some sectors.
“Policymakers are likely to look through those short-term pressures both on wages and, arguably, prices until borders reopen and labour supply is re-established. It is for these reasons that we think monetary policy in 2021 will remain fully committed to stimulus,” Mr Evans explained.
The big four bank’s economist believes strong iron ore prices and improvements in labour markets will lead to a stronger budget position, with the government likely to capitalise on its improving starting point for the deficits in 2020-21 and 2021-22.
“That will provide ample scope to initiate policies to sustain strong support for the economy, the economist predicts.
“Initiatives around personal tax, child care, aged care, energy and education should see significant boosts to spending in the federal budget on May 11,” Mr Evans concluded.
About the author

About the author


Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more

Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more

Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more

Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more

Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more

Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more

Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more

Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more

Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more

Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more

Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more

Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more

Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more

Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more

Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more

Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more