Australia’s mid-year budget update predicts a smaller deficit of $36.8 billion for this financial year, $5.4 billion better than earlier forecasts. The total deficits over four years have improved by $8.4 billion. Federal debt now is not expected to cross $1 trillion until 2026-27, a year later than first thought. Treasurer Jim Chalmers said, "This is the only mid-year update on record that has delivered a better bottom line every year of the forward estimates, less debt in every year of the forward estimates and net policy decisions that improve the bottom line." Major boosts in company tax receipts came from high commodity prices, especially iron ore and gold. Highlights include $233 million extra for CSIRO after job cuts, $98 million to fast-track 6,000 tradies and set up a new training center in energy skills, and $1.1 billion for more free mental health services and training places as promised at the election. Inflation outlook worsens, with expectations to stay around 3.75% by mid-2026, well above the Reserve Bank’s 2-3% target. The jobless rate is now expected to peak at 4.5%, slightly above the current 4.3%, while wage growth slows to 3.25%, indicating falling real wages. The budget warns the Australian economy "is gathering momentum in the face of substantial global uncertainty," and a rate hike may happen as early as the Reserve Bank’s next meeting in February.