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Australia's Fiscal Metrics Likely to Stay Broadly Flat in the Near Term, Fitch Says

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Conflict-driven oil price volatility has increased uncertainty around growth, revenue, and future fiscal support needs for Australia, and its fiscal metrics are likely to remain broadly flat in the near term, Fitch Ratings said in a note on Tuesday.

The country's budget for the fiscal year ending June 2027 is broadly in line with expectations around its "AAA" rating with a stable outlook, which was last affirmed in October 2025.

Australia's broader sovereign fiscal profile is likely to remain more stretched than the median for the "AAA" rating, per the note. The medium-term fiscal trajectory is likely to depend increasingly on whether growth slows more sharply than the budget assumes.

The underlying federal government cash deficit as a share of gross domestic product (GDP) is officially projected at 1% in fiscal year 2027, in line with the official estimate for fiscal year 2026. Spending is rising through transfers to states, higher debt interest, indexed social security costs, as well as additional health and defence outlays.

Receipts at 25.8% of GDP projected are supported by buoyant tax collections driven by rising domestic inflation and global commodity prices. Such revenue support could turn out to be temporary if weaker domestic demand or changing global economic conditions lower parameter effects and tax receipts.

Federal gross debt is projected at 34% of GDP in fiscal year 2027, up 0.9 percentage points from the official fiscal year 2026 estimate, but 0.6 percentage points below Fitch's current forecast.

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