sydneythe australian governments budget for 20222023 reveals a solid bottomline improvement as surging commodity prices and the strongest job market in halfacentury boost revenues but the outlook remains grim as spending demands are expected to surge while inflation stays higher for longer and global recession risks grow the global economy teeters again on the edge with a war that isnt ending a global energy crisis that is escalating inflationary pressures persisting and economies slowingsome of them already in reverse treasurer jim chalmers said in a speech to parliament on tuesday mr chalmers said the budget deficit in the current fiscal year will fall to 3690 billion australian dollars us2330 billion less than half of what was forecast in may but also confirmed that gross government debt will balloon to around a1004 trillion or 408 of national output in 20232024 before climbing to 431 of gdp in 20252026 the shortterm improvement in the budget has been helped by gains in a broad basket of commodity prices including iron ore which accounts for around one quarter of export earnings the benchmark price of iron ore has averaged roughly us125 a metric ton in the year to date according to sp global commodity insights the budget faces growing spending pressures as costs in areas such as healthcare defense and aged care spiral over the coming years the budgets cash balance will deteriorate in that time peaking at a deficit of a513 billion or 20 of gdp in 20242025 while the temporary revenue boosts were are getting from higher employment and higher commodity prices will fade and fall the profound and permanent spending pressures on the budget are forecast to grow and grow mr chalmers said the budget is the labor partys first since coming to power in may with mr chalmers focused on delivering election promises easing livingcost pressures while also acknowledging a rapidly deteriorating global economic environment that could drag australia back into recession its first since the start of the pandemic still the resourcerich economy is expected to avoid with recession as growth slows to 15 in 20232024 from 325 in 20222023 while we intend to avoid the worst of the turbulence from overseas we cannot escape it completely mr chalmers said critically inflation is expected to remain higher for longer potentially challenging the reserve bank of australias recent decision to slow the pace at which it is raising official interest rates the inflation rate is expected to peak at 775 in the fourth quarter of this year but remain above the rbas 2 to 3 inflation target until 202425 the rba has been raising interest rates since may at the fastest pace since the mid1990s but chose to slow the speed at which it is tightening the policy screws this month amid accelerated falls in house prices if inflation lingers above the rbas target band until 2025 pressure could build on the central bank to keep raising rates for longer or even reaccelerate the pace of hikes a silver lining in the budget is in expectations for unemployment while the government expects the unemployment rate to rise to 45 in 20232024 from the current 35 joblessness will still be at historically low levels a key support for consumers facing spiraling living costs as pressure on government spending builds over the coming years labor looks set to come under increasing demands to reform the tax system this is just the beginning of our budget repair work and its just the beginning of the conversation we need to have as a country mr chalmers said the government has retained incometax cuts slated for mid2024 despite widening calls for them to be abandoned on the grounds that they are too weighted toward the higherpaid and come with the budget still well short of repair following huge pandemicrelated stimulus spending mr chalmers was pressured to consider ditching the incometax cuts given the backdrop of financial instability and political upheavals that followed the uk governments illfated plans to boost growth by massively lowering taxes the budget directly targets rising cost of living pressures in the economy directing funding toward cheaper child care expanding paid parental leave cheaper medicines more affordable housing and efforts to boost wages growth