Eco U4 AOS 1 Data

Budget outcome 2025/26

estimate $28 bn deficit – final known in October

Budget outcome 2026/27

estimate $32 bn deficit

Roughly expected outcomes in next 4 years after 2026/27

Roughly staying around $30bn not achieving surplus to 2036/37 on projections

Note:

• Know at least 3 budgetary initiatives from last 2 years

• At least one must be from 2026/27

• At least one must be a spending initiative

• At least one must be a taxing initiative.

(I recommend:  Fuel Excise Cut; Local Infrastructure Fund; Income Tax Cuts but others possible).  You do not need all the detail in the spreadsheet.

• Current TCR

• TCR over the past 2 years

• Current TCR is 4.35%

• contractionary for most of 2024

  RBA loosened in 2025 down to 3.6%

  started tightening again in February 2026

Note:

Forward guidance: May 2026 statement RBA will do what ever is necessary to achieve dual mandate (LASI and FE) “including increasing the cash rate target further if required”.   Intended to signal possible further tightening.

• Current GDP growth

• GDP growth over past 2 years

• 2.5% for year ending March 26

• slowly increasing from very low (0.8%) in late 2024

  BUT most recent figure the same as Dec 25 so growth increase may have stalled

• Current UE rate

• UE over past 2 years

• 4.4% June 26 just in FE range

• UE over past 2 years:

has been down as low as 3.5% in June 2023 has crept up a slowly since then

• Current inflation rate

• Inflation over past 2 years

• 3.8% year ending June 26

• Inflation over past 2 years:

has been above 3% since September 2025 

4.6% for year ending March 2026 and has fallen each month since then

How is the war in Iran affecting inflation and growth?

• Directly pushing up CPI (as petrol is part of CPI)

• Pushing up production costs for businesses as almost all businesses spend on transport

• Pushing up other production costs such as fertiliser for farmers

• Slowing growth by slowing aggregate supply and reducing consumer confidence

Income tax cuts (2025/26)

From 1 July 2026, the 16% tax rate (applying to income between $18,201-$45,000) will be reduced to 15%, then further reduced to 14% from 1 July 2027 --> these cuts cost $17.1 billion over three years and will provide a worker on average earnings ($79,000) with an additional $268 in 2026-27 and $536 annually from 2027-28.     These tax cuts will boost AD (C – higher disposable income) (starting July 2026) --> make SSEG and FE easier to achieve    But will increase inflationary pressures --> due to increased AD (increased likelihood of demand inflation)    Improve LS – more consumption of goods and services, higher employment and incomes

Suburban Rail Loop (2026/27)

The 2026-27 budget committed an additional $3.8 billion to the Suburban Rail Loop (SRL) East in Victoria, bringing total federal funding to $6 billion (part of $8.6 billion in new road and rail spending)  The SRL is an orbital underground rail line connecting Melbourne’s suburbs  It is expected to generate up to 3,000 construction jobs and around 8,000 long-term jobs, with trains running by 2035    This spending will boost AD (G1) --> make SSEG and FE easier to achieve    It may increase inflationary pressures in the short term (due to increased AD) but should reduce them in the long term by increasing aggregate supply (better transport links lower business costs, reduce congestion and raise productivity)    Improve LS – better transport connectivity, reduces congestion and jobs

Fuel excise cut (2026/27)

In response to the oil price shock caused by the war in the Middle East, the 2026-27 budget cut the fuel excise (tax on fuel) by 26.3 cents per litre and removed the Heavy Road User Charge (fee paid mainly by heavy vehicles) for three months, at a cost of $2.55 billion --> This reduces the cost of a 65 litre tank of petrol by about $19    This increases AD (as more disposable income due to spending less on petrol) --> makes SSEG and FE easier to achieve    The impact on inflation is tricky:   -->  it boosts disposable income and AD (helping growth and employment) - increases risk of demand inflation  -->  However cutting the fuel excise also directly LOWERS measured inflation in the short term, because automotive fuel is included in the CPI basket and so CPI records lower fuel prices   --> so in the short term it actually helps the goal of low inflation, even though the extra spending it allows adds some demand pressure  --> The cut is also temporary (three months)    Improves LS --> eases cost-of-living pressures from high petrol prices