(Bloomberg) -- Australia probably recorded a second consecutive budget surplus — a rare example of fiscal strength in a world dominated by deficits — due to stronger commodity prices and an ultra-tight labor market.

Economists reckon Tuesday’s budget will show the government’s books in the black to the tune of A$11 billion ($7.3 billion), or 0.4% of gross domestic product, in the 12 months to June 30. Such an outcome would bolster the center-left Labor government’s economic credentials as it prepares for an election due in a year.

Still, the budget is expected to swing back into deficit in subsequent years as a combination of a structural deficit and a weaker economy take a toll. Hence, Treasurer Jim Chalmers’ recent refrain of focusing on inflation — which is still sticky — in the near term and economic growth from thereon.

“With fiscal policy becoming less restrictive the government will need to ensure it is balancing the need to continue to get inflation down while providing targeted support,” said Pat Bustamante at Westpac Banking Corp.

Targeted support is likely needed as high interest rates and inflation squeeze household incomes, eroding the government’s standing in polls with sentiment surveys showing Australians remain gloomy.

Typically, a budget surplus in Australia is a political victory for the government as it indicates strong economic oversight — even if driven by external forces. But now, with inflation expected to hold above the Reserve Bank’s 2%-3% target through 2025 and interest rates at the highest level since late 2011, keeping fiscal and monetary settings in sync is crucial to cooling price pressures.

Australia is one of only a handful of economies with a coveted AAA credit rating from all three major agencies.

Australia’s anticipated budget surplus compares with an expected 6% deficit in the US, 3.6% in the UK, 1.3% in Canada and 2.5% in New Zealand in 2024, according to forecasts compiled by Bloomberg.

Bloomberg’s Australia survey also asked economists whether they expected Chalmers’ budget to help or hinder the Reserve Bank’s efforts to bring down inflation. The responses were mixed. 

AMP Ltd. said the fiscal blueprint would “hinder” the inflation fight, Commonwealth Bank of Australia Ltd. and QIC Ltd. expected it would “help,” while Barrenjoey Markets Pty Ltd.’s Johnathan McMenamin responded “neither.”

Adam Boyton of ANZ Banking Group Ltd. said budget-watchers will have a “strong focus” on the size of net new government spending on Tuesday, adding that the release is unlikely to have an impact on his growth, inflation or RBA rate forecasts. 

CBA’s Gareth Aird said it’s in the government’s interests to see inflation cool so that there is some rate relief ahead of the election due by May 2025. 

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The RBA raised rates 13 times between May 2022 and November last year to a 12-year high of 4.35% to try to quell consumer prices. Earlier this week, Chalmers described the upcoming budget as an inflation-fighting and future-making program.

“We are charting a responsible middle path. We are striking the right balances in the budget,” he told reporters.

Economists broadly expect some cost‑of living relief, primarily via already-announced income tax cuts, investments in productivity enhancing reforms, establishment and development of the Future Made in Australia strategy and lowering the costs of higher education among others.

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