SYDNEY, June 28 Reuters Australia39;s budget surplus for 202223 will be bigger than the A4.2 billion 2.81 billion projected in the May budget but high inflation and global challenges will significantly slow the domestic economy, Treasurer Jim Chalmers said on Wednesday.

Strong jobs growth and bumper mining profits will swell government coffers, similar to the forecast during the federal budget, while spending curbs and A40 billion in savings have also boosted the budget bottom line.

I can reveal that we39;re expecting the surplus will be bigger than forecast in May, Chalmers said in a speech to the Property Council of Australia. In fact, we39;re in a significantly better position than we forecast.

Australia39;s Labor government in May boasted the first budget surplus in 15 years for the year to June 2023, a huge turnaround from the A37 billion shortfall forecast last October.

But Chalmers said the increases in interest rates by the Reserve Bank of Australia RBA, which now sit at an 11year high, and warnings more tightening may be required to push inflation to target will put the brakes on economy.

The 400basis point increase in rates since before the election last year, is the most significant tightening cycle the RBA has undertaken since the inflation targeting era began, the treasurer said. And this, along with global challenges, will significantly slow our economy.

The Australian economy could dip to 1.5 in 202324 from 3.25 this fiscal year, he said.

Ahead…