Treasurer Jim Chalmers says the deficit improvement mainly comes from higher tax receipts from superannuation and investment income, not from commodity prices or wage growth.

Total gross government debt sits at about A$971.4 billion, roughly 10.6 billion below projected, or 33.2% of GDP.

The Reserve Bank of Australia is broadly expected to lift rates to about 4.6% to tackle inflation, while the labor market remains resilient with unemployment near 4.6%.

The 2025/26 deficit followed two years of surpluses and was larger than the A$10 billion shortfall seen in 2024/25.

Even with the deficit improvement, the government’s spending remains at four-decade highs outside the COVID period, signaling sustained outlays.

Australia posted a final budget deficit of A$22.3 billion for the year to June 2026, about 0.8% of GDP, better than the earlier forecast of a larger shortfall.

For 2025-26, the deficit narrowed to A$22.3 billion (0.8% of GDP) from an earlier forecast of 1% in May’s Budget.

Exchange rate note: A$1 equals US$0.70 approximately, with $1 equals A$1.4245.

The government had expected a potential widening to a A$31.5 billion deficit in 2026/27, but higher global borrowing costs from a bond rout have changed conditions.

Mining profits were weaker than anticipated, indicating commodity prices did not drive the improved deficit.

Total tax receipts reached A$704.4 billion, aided by an extra A$4.6 billion from personal income tax related to business and investment income and higher superannuation fund receipts.

The government argues debt-to-GDP is lower than in major advanced economies and notes the Budget carries a AAA rating for prudent management.