The federal government’s mid-year budget update shows a modest improvement in the deficit forecast in 2025–26, but much of this comes from a larger-than-forecast tax take.
The update, known as the Mid-Year Economic and Fiscal Outlook (MYEFO), estimates a deficit for 2025–26 at A$37 billion, or 1.3% of gross domestic product (GDP). This is down from the $42 billion forecast in the March 2025 federal budget and the Pre-election Economic and Fiscal Outlook (PEFO) issued before the May election.
The drivers of the $5 billion improvement in the bottom line are largely outside government control – higher global commodity prices, and a higher income tax take. That’s due to a stronger jobs market and higher wages growth than previously forecast.
