Australia’s budget deficit for the 2025-26 financial year is set to come in billions of dollars below the forecast published in the May federal budget, Treasurer Jim Chalmers said on Sunday. The government is due to publish the final figures on Monday, providing the first full accounting of how the year ended relative to the budget estimate.
Chalmers said in a video posted on social media that the budget bottom line had improved again since the May budget. He said the result would be better than the position forecast at the election and better than the government had anticipated when it delivered its latest budget. The comments were reported by multiple outlets, but the final fiscal outcome has not yet been released.
The May 2026 budget had forecast an underlying cash deficit of A$28.3 billion for 2025-26, equivalent to 1% of gross domestic product. That estimate was already an improvement of A$8.5 billion from the forecast contained in the previous Mid-Year Economic and Fiscal Outlook. The government’s budget papers attributed the improvement to changes in revenue, spending and policy decisions. Budget Australia
The final result will therefore show whether the government exceeded the forecast through stronger revenue, lower-than-expected spending, or a combination of the two. The Department of Finance’s monthly statements had already indicated some improvement during the year. Through May, the underlying cash balance showed a A$10.9 billion deficit, while receipts were A$1.7 billion above the revised budget profile and payments were A$5.9 billion below it. Ministers for Finance
The improvement comes as Australia faces a more difficult monetary and fiscal environment. The Reserve Bank of Australia has been dealing with persistent inflation pressures, while higher interest rates are increasing the cost of servicing government debt. Australia’s recent rate increases and the prospect of inflation remaining elevated have also complicated the government’s effort to improve its fiscal position without adding to demand. Australia’s recent interest-rate increases and inflation pressures provide wider context for the fiscal backdrop.
A smaller-than-forecast deficit would improve the government’s near-term fiscal position, but it would not eliminate the broader pressure on Commonwealth finances. The May budget projected an underlying cash deficit of A$31.5 billion for 2026-27, followed by deficits throughout the remaining forward estimates. Gross debt was forecast to reach A$982 billion at the end of 2025-26, before rising further over subsequent years. Budget Australia +1
The final budget outcome is an important benchmark because it replaces forecasts with audited fiscal results for the completed financial year. Under Australia’s budget framework, the Final Budget Outcome provides the actual fiscal outcomes for the preceding year and is required to be released within three months of the financial year ending. Budget Australia
For now, the precise size and composition of the improvement remain unknown. The government’s A$28.3 billion May forecast is the relevant benchmark, while the final figure due Monday will determine how much better the 2025-26 deficit actually was and whether the improvement was driven primarily by stronger revenues, underspending or other changes in the Commonwealth accounts.
