Higher State-Level Deficits Becoming More Crucial for Australia's Fiscal Health, Fitch Says

MT Newswires Live11-29 20:19

State-level deficits have increasingly become crucial for Australia's overall fiscal health, as they have kept the general government in deficit despite surpluses from the federal government in recent years, Fitch Ratings said in a Thursday release.

Since the pandemic, state deficits have averaged around 2.2% of GDP, more than double the pre-pandemic average, Fitch said.

As the deficits narrow gradually, they may only reach pre-pandemic figures until fiscal year 2028, Fitch said.

A substantial pipeline of state capital expenditures also adds to the slower pace of consolidation, although Fitch expects the investments to peak in the current fiscal year.

Fitch sees the general government deficit increasing to 2.6% of GDP in both fiscal years 2025 and 2026.

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