The Labor Party's second consecutive term in government in Australia after a victory in federal elections should ensure that economic and fiscal policies evolve broadly in line with their current trajectories and reinforce the likelihood of fiscal easing in the near term, Fitch Ratings reported on Thursday.

Central government deficits should be contained at levels broadly consistent with our expectations.

The ratings firm forecast Australia's economy to grow by 1.7% for the current year, up from 1.1% in 2024, as the domestic economy rebounds on the back of policy easing and stronger consumption.

Treasurer Jim Chalmers said after the election that the government's economic policy focus for the second term will be on boosting productivity. Housing affordability, supporting the ongoing energy transition, skills development, and competition policy are expected to be among the key priorities.

Based on the budget, Fitch revised its central government deficit projection to 1% of the GDP in the fiscal year ending June 30 and 1.4% in fiscal year 2026, slightly wider than projections of 0.7% and 1.2%, respectively, in its assessment last November 2024.

Commodity revenues should continue to boost the government's fiscal revenue and contain deficit outcomes relative to the conservative price assumptions reflected in the budget.

Nevertheless, commodity prices are expected to ease further, leading to reduced revenue windfalls.