World Economy

Australia Borrowing Rises

Australia Borrowing RisesAustralia Borrowing Rises

Australia has increased its fiscal deficit forecasts for the next four years compared to May’s predictions, the most recent mid-year economic forecast has shown.

In the forecast, the country’s treasury said it expects to run up deficits that are $3.2 billion higher than budgeted for in May this financial year and $2.6 billion more the year after that. It then expects a deficit worth $5.5 billion more than envisaged before the summer in 2018-19 and $4.3 billion more in 2019-20, ABC reported.

Public debt is projected to peak at 19.0% of GDP in 2018-19 and then to start declining.

The anticipated increases in the shortfall are a result of low prices and low wages. Real gross domestic product is set to grow by 2% in 2016-17, down from 2.5% in May.

The figures show a deteriorating fiscal position in one of the world’s most credible borrowers, with ratings agencies reportedly considering downgrading Australia from its triple-A rating.

The revised number means the country will no longer believe it will eliminate the deficit within the next four years as originally projected.

Increases in the price of commodities, including iron ore and coal, are still expected to give a boost to the private sector and in turn tax collection.

“However, this will be more than offset by the impact of weaker growth in aggregate wages and non-mining profits,” the report added.

Meanwhile, Fitch reported that “Australia’s public debt ratios are likely to peak later—and at a higher level—than previously expected by the government and Fitch Ratings as the economic outlook weakens. However, the debt trajectory remains consistent with our ‘AAA’/Stable sovereign rating on Australia, most recently affirmed in September.”


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