(Bloomberg) --
Australia's budget deficit this fiscal year will be A$30 billion ($23 billion) narrower than the government's mid-year forecast as a surge in hiring and iron-ore prices bolstered revenue, Deloitte Access Economics said.
The underlying cash deficit in the 12 months through June will be A$167 billion, Deloitte said in a report released Monday, compared with Treasury's December estimate of A$197.7 billion. The budget shortfall will almost halve again in fiscal 2022 to A$87 billion, it said.
“The budget is getting better rapidly because the economy is getting better rapidly,” said Chris Richardson, a Deloitte partner. “Yes, things are getting a lot better. But they are getting better from a starting point in which the proverbial had hit the budgetary fan.”
Australia's economy has recovered rapidly from the pandemic as early containment of Covid-19 boosted confidence and fiscal and monetary stimulus supported firms and households through the crisis. That helped fuel a surge in hiring, with unemployment falling to 5.6% in March from a peak of 7.5%, meaning increased tax revenue and fewer welfare payments.
In addition, iron ore, Australia's largest export, last week approached all-time highs. Miners have been struggling to keep up with demand from Chinese steelmills as the world's second-largest economy accelerates.
Looking further ahead, Deloitte forecasts underlying cash deficits of A$56 billion in fiscal 2023 and A$49 billion in fiscal 2024. That suggests that over the four years to fiscal 2024 the budget will be almost A$100 billion better off, Deloitte estimated.
“To be clear, the economy remains under a lot of pressure,” Richardson said. “But that pressure is much less than the official forecasts had factored in.”
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