BUDGET IN THE BLACK, BUT RESOURCES DIP

Budget surplus on repeat, but deficit looms

Australia has recorded a higher-than-forecast budget surplus for the 2023-24 financial year, with the Federal Government delivering the first back-to-back surpluses for 16 years. Treasurer Jim Chalmers said the underlying cash surplus of $15.8 billion was achieved through lower payments and despite lower tax revenue. Dr Chalmers said payments were $10.2 billion lower than forecast, while tax receipts were $5.3 billion lower than forecast – attributed partly to lower prices for key export commodities. The May Budget forecast a surplus of $9.3 billion for 2023-24, but a budget deficit of $28.3 billion for 2024-25.

Resource exports tipped to fall 10 per cent

Export earnings from Australia’s resources sector are projected to fall by more than 10 per cent to $372 billion in 2024-25, according to official government forecasts. The Department of Industry, Science and Resources says weaker global prices, slower world growth and increased supply of key commodities will hit earnings. Income from iron ore exports is predicted to fall by $31 billion, to $107 billion, in 2024-25, while liquefied natural gas (LNG) exports are forecast to fall by $3 billion, to $66 billion. Weakness in the steel sector will also reduce earnings in thermal and metallurgical coal, according to the department’s Resources and Energy Quarterly report.

Labor seeks to extend decade-long rule in Queensland

After almost 10 years in government, Labor will seek a fourth term when voters go to the polls in Queensland on October 26. Premier Steven Miles is contesting the election against the Liberal National Party Leader David Crisafulli, who previously served as a Minister in the one-term LNP government that was defeated in early 2015. Labor presently holds 51 seats of the 93-seat Legislative Assembly in the Queensland Parliament, with the LNP 35 seats, and Greens and other crossbenchers, seven seats. Dr Miles succeeded Annastacia Palaszczuk as Premier in December last year. Opinion polls have the LNP on track to defeat Labor, with a strong focus on law and order, and cost of living issues. Unlike other states, the Queensland Parliament does not have an upper house, and many of the key seats are outside the capital city, Brisbane.

US Defense Secretary defends AUKUS submarine timetable, IP regime

US Defense Secretary Lloyd Austin III has sought to address concerns that the Virginia class submarine program was behind schedule, and unable to meet Australia’s requirements under the AUKUS partnership. Speaking after a meeting of AUKUS defence ministers, Secretary Austin said the US was investing more in the submarine industrial base in order to expand capacity and meet the production objectives. He also said that the US was not taking things for granted in expanding defence technologies under Pillar 2 of AUKUS, particularly in protecting intellectual property on a project-by-project basis. Meanwhile, Australian Defence Minister Richard Marles said that under AUKUS, maintenance had been performed in Perth on USS Hawaii – the first time it had been done on an American nuclear-powered submarine outside of the US or on a US base. The work had also been performed, for the first time, by non-US citizens.

Electricity rebates power sharp fall in monthly inflation

Annual inflation has taken a sharp drop in the 12 months to August, falling to 2.7 per cent according to the latest Consumer Price Index indicator. The Australian Bureau of Statistics, however, has attributed the sharp fall (down from 3.5 per cent in July) to the provision of government-funded electricity price rebates. Electricity prices fell by almost 18 per cent over the 12-month period, while automotive fuel fell by 7.6 per cent. The ABS noted that underlying inflation – which ignored irregular or temporary price changes – stood at 3.4 per cent over the same 12-month period. Insurance costs rose by 14 per cent, contributing to a level of underlying inflation higher than the headline rate.

Productivity growth sagging, says economic agency

Productivity growth in Australia appears to have reverted to the same stagnant pattern as before the Covid-19 pandemic, according to the Federal Government’s chief economic advisory body. A report by the Productivity Commission (PC) said that labour productivity declined by 0.8 per cent for the whole economy in the June 2024 quarter, with the growth in hours worked outpacing output. The PC said labour productivity had decreased in both the market sector (by -0.7 per cent) and the non-market sector (-0.9 per cent). It noted that the post-Covid economy was “very different”, with current low unemployment and higher interest rates relative to the 2015-19 period.