Workers will wait another two years for real wages to rise after the Albanian government warned in its first budget that inflation would outpace wage growth until 2024/2025.
Treasury forecasts in the 2022/23 budget show that the tight labor market will push wage growth to 3.75 percent in 2022/23 and 2023/24, before falling to 3.25 percent in 2024/25.
By then, inflation is expected to have fallen from a likely peak of 7.75 percent later this year to 2.5 percent — again within the Reserve Bank of Australia’s target range — and below the pace of wage growth.
If all goes well, Labor will deliver on its election promise to get real wages moving about two years after taking office.
Treasury forecasts wage growth to reach 3.75 percent in 2022/23 and 2023/24, before falling to 3.25 percent in 2024/25. Inflation is expected to have simmered to 2.5 percent and below the pace of wage growth by then. Depicted workers at a Sydney construction site
Strong employment and skyrocketing commodity prices have helped the Labor government meet a deficit half the size forecast in the former coalition government’s budget announcement in March.
Treasurer Jim Chalmers’ first budget, handed over Tuesday, points to a smaller-than-expected deficit of $36.9 billion for 2022/23, less than half of the $78 billion previously identified.
But public finances will go deeper into the red than future estimates, as the temporary boost from commodities and high employment dries up and areas of unavoidable spending – such as the interest bill on debt and health care – continue to rise.
The first budget handed over by Jim Chalmers (pictured) points to a smaller than expected deficit of $36.9 billion for 2022/23, less than half of the $78 billion previously signaled
The deficits are expected to increase to $44 billion in 2023/24, $51.3 billion in 2024/25 and then improve slightly to $49.6 billion in 2025/26.
The string of deficits will push the budget into debt of more than $1 trillion in the next fiscal year, before rising to $1.16 trillion by 2025/26.
Major commodity prices, such as iron ore, metallurgical coal and thermal coal, are expected to ‘slide downward’ towards more historically normal prices in the quarters of December 2022 and March 2023.
dr. Chalmers gave his budget speech and told parliament that the global economy was teetering on the brink of recession.
“But while we intend to avoid the worst turbulence from abroad, we can’t quite escape it,” he said.
“Global challenges, along with high inflation and higher interest rates, will have an impact.”
Major commodity prices, such as iron ore, metallurgical coal and thermal coal, are expected to ‘slide’ towards historically normal prices. Pictured is an Australian iron ore operation
Treasury has slashed its economic growth forecast since the coalition budget in March, with gross domestic product expected to fall to 1.5 percent in 2023/24 before starting to recover.
Growth is expected to increase by 2.25 percent in 2024/25 and then 2.5 percent in 2025/36, according to Treasury forecasts.
“The blow to growth will have an effect on employment, but jobs will continue to be created and unemployment is expected to remain at historically low levels,” said Dr Chalmers.
The Treasury’s budget forecast for the unemployment rate has been revised upwards from July estimates to peak next fiscal year at 4.5 percent.
The department previously expected the unemployment rate to peak at 4.25 percent.
While the budget delivers on key election promises, such as cheaper childcare and medicines, it emphasizes restraint in spending for fear of driving inflation further.
The Treasury’s forecast for the unemployment rate is expected to peak at 4.5 percent next fiscal year
The treasurer pointed to a “budget repair package” that will deliver a $28.5 billion improvement over forward estimates.
The ‘repair’ includes throwing out coalition projects and minor tax reforms, namely new measures to stop multinational tax avoidance.
Despite calls to scrap the phase three tax cuts, there was no new line in the budget describing their demise.
The government has also chosen to fund 99 percent of a likely temporary revenue increase from high commodity prices in 2022/23 as a budget repair measure.
According to forward estimates, more than 90 percent of tax upgrades will be returned to the budget rather than spent.
“This is just the beginning of our budget repair work and it’s just the beginning of the conversation we need to have as a country,” said Dr Chalmers.