Resource-rich Australia is on track to achieve its first budget surplus in 15 years, with a projected Aus$4.2 billion ($2.8 billion) surplus for the year, according to the country's treasurer, Jim Chalmers. The centre-left Labor party, which came to power last year, sees this as evidence of their "responsible economic management". Australia's economy has been boosted by record-high commodity prices, with iron ore and coal among its leading exports. Rising tax income, driven by near-record-low unemployment, is also helping to deliver the surplus. However, economic growth is expected to slow from 3.3% in 2022-23 to 1.5% in 2023-24.
Pacific Island Support and Defence Boosts in Budget
The budget includes notable spending on supporting Pacific Island neighbours and defence, with Aus$1.9 billion earmarked for the Pacific. The labour mobility scheme, which will allow Pacific Island workers to work in Australia, will be expanded. The Pacific region is of strategic importance to Australia and its allies, who are ramping up efforts to counter China's increasing diplomatic, economic, and military influence. The budget also includes an increase in defence spending, with just over 2% of gross domestic product being allocated. Aus$9 billion will be spent on the joint Australia, United Kingdom, and United States nuclear-powered submarine program, and Aus$4.1 billion on long-range missile capabilities.
Australia's Economic Dependence on Resources
Australia's economy has been heavily reliant on its vast resources, including ores, fuels, and minerals, for decades. Despite efforts to diversify away from these resources, iron ore, coal, and gas remain the country's three largest exports. Australia's efforts to reduce carbon emissions have had little impact on its reliance on these resources. Iron ore reached an all-time price high in 2021, and coal reached a record soon after. In March, iron ore prices were more than double what the government had initially forecast, due to increased demand from China, which is gradually reopening.
Making Friends and Increasing Diplomatic Staff
Aside from the budget surplus and defence spending, the budget also includes funding for additional diplomatic staff across the Pacific. This is part of Australia's efforts to increase its engagement with the Pacific region and support its allies. Foreign Minister Penny Wong said that Australia would also expand its security assistance, bolstering regional infrastructure and maritime security capabilities.
