© Reuters. Customers at a local cafe are seen through a window displaying a job vacancy notice in central Sydney, Australia, May 9, 2016. Picture taken May 9, 2016. REUTERS/Steven Saphore
SYDNEY (Reuters) – Australia’s government is set to cut its forecasts for inflation while also predicting lower unemployment for longer in 2023/24 budget next week, a mix that it hopes will generate much-needed growth in real wages.
Treasurer Jim Chalmers will now forecast unemployment of 3.5% for the June quarter of this year and 4.25% for the same period in 2025, both a quarter point lower than in the last budget in October, according to an extract of next Tuesday’s budget seen by Reuters.
Treasury also sees half a million new jobs being created by the middle of 2026, up from a previous forecast of 300,000.
The budget is expected to forecast real wages growth of 0.75% over the year to June 2024, up by half a percentage point from October, with inflation seen slightly lower and nominal wages growing faster.
That sits in contrast to the Reserve Bank of Australia (RBA) which on Friday lowered its forecasts for wage growth for June 2024 to 3.9%, from 4.1%, while keeping its inflation estimate at 3.6%.
Chalmers has repeatedly stated his budget would be restrained on spending so as not to add to inflationary pressures, while also giving some targeted relief for cost of living pressures.
“While low national unemployment is one of our best defences against the headwinds that are intensifying in the global economy right now, Australia will not be immune from these challenges,” says Chalmers in the budget extract.
“The May Budget will be focused on targeted cost-of-living relief that doesn’t add to inflation.”