Budget 2025 Preview: Pressures and tensions along the austerity road to fiscal sustainability

Abstract

This policy brief, ahead of the tabling of the 2025 Budget Review, considers the policy context and the fiscal and economic environment in which the Budget will be tabled. It considers the merits, limitations, and likely consequences of the government’s approach to budget policy over the medium term, as contained in the 2024 Medium-Term Budget Policy Statement (MTBPS), which redoubled efforts to consolidate public finances while attempting to promote capital spending. Since the MTBPS, several material expenditure pressures have emerged, some of which were flagged in the Public Economy Project’s (PEP) 2024 MTBPS analysis, and the economic outlook has been revised. Based on this, the Public Economy Project’s revised outlook for public finance finds that the government’s ambitious plan to stabilise debt over the medium term is unlikely to be realised.