This year’s Budget is set against a background of higher living costs, a looming federal election, and international security tensions.

Central banks worldwide are lifting interest rates to control inflationary pressures, and the Reserve Bank of Australia may soon follow suit. While the Australian economy has solid momentum, households are feeling the pinch of higher prices at the petrol bowser and in the supermarket.

Treasurer Frydenberg’s Budget strategy has shifted to focus on growing the economy to stabilise and reduce government debt. Higher tax revenues from more workers employed and higher commodity prices, as well as a stronger economy no longer in need of stimulus, have enabled this shift.

With this background in mind, what are the key Budget outcomes and forecasts?

 

Key Budget outcomes:

  • Narrower deficits – forecasts are for smaller deficits in all years with the deficit for 2022-23 expected to be $78bn (3.4% of GDP).
  • No major structural Budget changes – rather a range of one-off cost-of-living adjustments and payments.
  • A temporary cut to the fuel excise rate – halving the current rate of 44.2 cents per litre for the next six months.
  • No major changes to super – aside from extending the halving of minimum drawdown requirements for a further year to 30 June 2023.

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Key Budget forecasts:

  • Solid improvement in Budget deficit forecasts – driven by robust commodity prices, a stronger than expected economy, higher tax revenues, and lower welfare payments.
  • Unemployment rate – forecast to move to historical lows of 3.75% and wages growth is expected to lift towards 3.5% over time.
  • Inflation – forecasts have moved higher, up to 4.25% this year before falling to 2.75% in 2023- 24.

Managing your super through volatility

 

Inflationary pressures and international security concerns continue to dominate financial markets which remain volatile. Market swings can be concerning when it comes to your savings. Often, the best course of action is to remember your long-term goals and stick to your plans. The good news is that there are proven strategies for dealing with market ups and downs that can help you focus on what matters when there are some unsettling headlines in the news.

Read more about market votality