Economic and Fiscal Outlook – October 2026 - Office of the Parliamentary Budget Officer

This report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.

Highlights

**The PBO has updated its economic and fiscal outlook from June 2026.**

Real GDP growth is projected lower than June, at 0.9 per cent in 2026 and 1.5 per cent in 2027, reflecting revised tariffs and trade conditions. Nominal GDP growth is projected higher, at 5.6 and 3.4 per cent, reflecting price increases, for oil and commodities.

Higher nominal GDP improved revenues from June. Incremental fiscal room is front-end loaded - highest in 2026-27 at $15.5 billion, declining to $3.4 billion in 2030-31. New spending and taxation measures since then are estimated to cost an additional $52.6 billion over those five years, rising over the period to $12.9 billion in 2030-31. As such, PBO projects an improvement in the projected deficit in 2026-27 to $63.3 billion, but a deterioration of $9.5 billion in 2030-31 to $67.8 billion compared to our June outlook.

PBO currently projects that the Government will meet its operating budget fiscal anchor in 2028‑29, with a surplus of $6.2 billion, following a small projected deficit in 2027-28. PBO projects the Government will not meet its second fiscal anchor of a declining deficit-to-GDP ratio, with this ratio projected to rise in 2027‑28 and, marginally, in 2029‑30. New measures to be announced in Budget 2026 could change the timing and profile of either anchor. On balance, the two fiscal anchors have imposed limited fiscal discipline on government spending and borrowing.

PBO anticipates that federal borrowing will grow significantly faster than deficits, which are measured on an accrual basis. Over the next five years, cumulative deficits are projected to total $333.3 billion, whereas federal borrowing is projected to rise by $732.9 billion, as the Government borrows to finance loans, capital investments, defence procurement and other financial assets, which add to national debt on a cash basis.

The federal debt-to-GDP ratio, the traditional measure of fiscal sustainability, is projected to rise each year, from 40.8 per cent in 2026-27 to 42.6 per cent in 2030-31. PBO anticipates that per capita federal debt will rise from $29,811 in 2021-22 to $33,436 in 2026-27 and $39,191 in 2030-31.