Treasurer Jim Chalmers is set to deliver the Australian Federal Budget on 25 March 2025, ahead of the upcoming federal election. This budget arrives amid economic challenges, including the aftermath of ex-Tropical Cyclone Alfred and global economic uncertainties.
Economic Impact of Cyclone Alfred
The recent ex-Tropical Cyclone Alfred is projected to have significant economic repercussions:
Gross Domestic Product (GDP): An anticipated immediate reduction of up to $1.2 billion, potentially decreasing quarterly growth by 0.25 percentage points.
Inflation: The cyclone may exert upward pressure on inflation, particularly affecting fruit and vegetable prices due to agricultural disruptions.
Rebuilding Costs: Substantial funding will be allocated for community rebuilding efforts, with the government provisioning an additional $1.2 billion in the upcoming budget for disaster support, bringing total disaster support to $13.5 billion.
Global Economic Challenges
The budget is also framed against a backdrop of global economic volatility:
Trade Disruptions: The new U.S. administration's trade policies have introduced uncertainties affecting global markets.
Slowdowns in Major Economies: Both China and the U.S. are expected to experience reduced growth, with forecasts indicating growth rates of approximately 4.5% and 2% respectively for the next year.
Geopolitical Tensions: Ongoing conflicts and political instability in various regions contribute to economic unpredictability.
Budgetary Outlook
After achieving two consecutive surpluses, the government anticipates a deficit in this year's budget, though it is expected to be smaller than previous projections. The December Mid-Year Economic and Fiscal Outlook (MYEFO) had forecasted a $26.9 billion deficit for this financial year, potentially reaching $46.9 billion by 2025-26. Chalmers emphasizes a commitment to responsible economic management, focusing on:
Cost of Living Measures: Implementing policies aimed at alleviating financial pressures on households.
Investments in Future Growth: Allocating resources to sectors poised to drive long-term economic development.
Political Context
The timing of the budget is closely linked to the forthcoming federal election, which must be held by May 2025. The budget is expected to outline the government's fiscal strategies and priorities, setting the stage for election debates.
Implications for ActOn Wealth Clients
Understanding the budget's provisions is crucial for financial planning:
Tax Policies: Potential changes may affect individual and business taxation.
Investment Opportunities: Government initiatives could create new avenues for investment.
Economic Indicators: Inflation trends and GDP forecasts are vital for informed financial decisions.
ActOn Wealth is committed to analyzing the budget's details to provide clients with tailored advice, ensuring alignment with their financial goals and the evolving economic landscape.
