Jim Chalmers to unveil $36.8b deficit for 2025-26
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The news: Treasurer Jim Chalmers has heralded a $5.4 billion contraction in the underlying cash balance deficit as part of the 2025 mid-year budget update when compared to the pre-election fiscal outlook.
At the October 2025 monthly financial statement, it indicated a $6 billion budget improvement compared to the pre-election fiscal outlook.
The numbers: The 2025-26 mid-year economic and financial outlook (MYEFO) will flag a budget deficit of $36.8 billion for FY26, which is $5.4 billion better than was projected in March 2025.
This is driven by $20 billion in savings, net policy decisions that have generated a $2.2 billion improvement to the bottom line, keeping annual real spending growth at 1.7% — about half the 30-year average of 3.3% — and saving most of the revenue upgrades.
Over the four years to 2028-29, the underlying cash balance is forecast to be $8.4 billion better compared to the 2025-pre election fiscal outlook.
The context: Economists were expecting the budget bottom line to improve for 2025-26, with estimates for the deficit ranging from $30 billion to $39 billion.
The government has now banked about 70% of the revenue upgrades over the last three and a half years.
The $20 billion in savings includes cuts to contractors and consultants in the public service, returning social security deeming rates to pre-pandemic levels and returns from uncommitted Hydrogen Headstart program funds.
The bottom line improvements were partially offset by $35 billion worth of additional pressures, including disaster relief, the age pension and defence benefits and entitlements. MYEFO also adds $10 billion to help drive housing construction alongside other new spending commitments.
What they said: “The bottom line is better in every year over the forward estimates because we’ve managed the budget sensibly and responsibly,” Treasurer Jim Chalmers said.
“Despite all the pressures we’ve had to accommodate in the budget, the bottom line is better in every year over the forwards thanks to our efforts.
“It builds on the biggest improvement in the budget in a single parliamentary term and is a powerful demonstration of Labor’s responsible approach to the nation’s finances. The mid-year budget update is all about responsible economic management and you see that in these figures.”
The source: Treasurer Jim Chalmers statement
