Federal Treasurer Jim Chalmers is set to deliver a pre-budget address preparing the Australian public for a tempered fiscal surplus, citing the dual pressures of declining iron ore prices and a softening labour market.
Scheduled to speak to the Committee for Economic Development of Australia this afternoon, Chalmers will detail the government's economic strategy, flagging that expected revenue upgrades will be less significant than initially anticipated.
Confident of surplus
Despite facing substantial spending commitments, including expansions in the National Disability Insurance Scheme (NDIS), aged care and university funding, the government remains confident it can deliver a surplus, albeit a revised one.
This comes in the wake of the Mid-Year Economic and Fiscal Outlook (MYEFO), which revealed an additional A$64.4 billion in government coffers, alongside A$9.8 billion in new spending cuts and A$5.2 billion in "unavoidable" new spending.
Chalmers is set to highlight "global uncertainty, persistent cost-of-living pressures and slowing growth" as the primary influences on the upcoming budget.
This marks a stark contrast to the more than A$100 billion in revenue upgrades seen in the government's first two budgets, with the treasurer forecasting substantially lower figures this year.
Iron ore price a factor
A key factor in this fiscal recalibration is the nearly 10% decrease in iron ore prices over the past week, driven by diminishing steel demand in China.
With iron ore trading at less than $94 a tonne, significantly below last year's budget projections, the potential surplus is under threat.
Additionally, thermal coal prices have not recovered as hoped, which further complicates the economic landscape.
The treasurer will also address the labour market's current state, acknowledging its resilience while preparing for a potential downturn in revenue upgrades.
With employment figures previously surpassing Treasury forecasts, Chalmers will caution against expecting similar fiscal windfalls in the immediate future.