Australia's Budget Deficit Narrows Ahead of Expected Rate Hike

Australia's budget deficit has narrowed by A$6 billion for the 2025/26 fiscal year, according to new figures released by Treasurer Jim Chalmers and Finance Minister Katy Gallagher.

The underlying deficit is now estimated at around A$22.3 billion, a significant improvement from the A$28.3 billion forecast in May's budget.

Gallagher attributed part of this improvement to the overhaul of the National Disability Insurance Scheme, which is expected to save almost A$38 billion over the next four years.

However, she cautioned that structural spending demands have not eased, with pressures on the budget coming from aged care, defence, and health sectors.

The fiscal update comes as the Reserve Bank of Australia prepares to deliver its highest cash rate in 15 years, amidst a deteriorating economic backdrop including rising oil prices and inflation above target band.