Bloomberg reports that Westpac Banking Corp.’s Bill Evans said that Australia’s fiscal position has undergone an “extraordinary improvement” that reflects a faster-than-expected recovery in the labor market and household spending, and higher commodity prices. 

The budget shortfall in the year ending June 30 will be A$155 billion ($120 billion), or 7.5% of gross domestic product, compared with the government’s December forecast of A$197.7 billion, Evans, chief economist at Westpac, said in a research note. It will narrow to A$84 billion, or 4% of GDP, in fiscal 2022, even with an expected additional A$20 billion of spending, he said.

“The budget strategy is to go for growth,” Evans said. “What drives fiscal repair is having the economy operating closer to full capacity -- with revenue boosted by a higher employment to population ratio. Spending restraint may well gain less traction – if the economy gets stuck in the slow lane.”