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(Bloomberg) — The economic surge caused by the end of China’s Covid Zero restrictions can’t offset the impact to the Australian budget from the global economic downturn, Treasurer Jim Chalmers said, just two days before he reveals his fiscal blueprint for 2023.

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Chalmers is expected to announce Australia’s economy has returned to surplus for the first time in 15 years on Tuesday night, benefiting from surging revenues from commodities exports and a persistently-strong labor market.

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Part of the budget windfall had been the Chinese economy picking up more quickly than expected over the past six months after the relaxation of Covid-19 restrictions, Chalmers said in an interview in Canberra on Sunday. China is Australia’s largest trading partner, with total trade more than twice as much as the next nearest country.

“But it’s offset by other things,” Chalmers told Bloomberg. “The global economy more broadly has been a bit softer than what people were anticipating.”

The International Monetary Fund trimmed global growth projections in its latest outlook published in April, with world trade facing headwinds from stubbornly-high inflation and rising borrowing costs. The Reserve Bank of Australia unexpectedly hiked the cash rate to 3.85% on Tuesday, the highest level in more than a decade.

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Despite difficult international conditions, Chalmers on Tuesday is expected to reveal lower inflation and stronger wage forecasts than previously estimated, with unemployment peaking at 4.5% in the 2024-25 financial year.

The treasurer on Sunday said two-fifths of the dramatic turnaround in Australia’s revenue was driven by high wage growth and employment, while only 20% came from improvements in commodity prices.

Booming Energy Profits Targeted by Australia With Tax Hike

However, budget deficits are expected to grow in the years ahead. Among revenue measures which will be detailed in the budget is a revamping of Australia’s petroleum resources rent tax, which is expected to raise A$2.4 billion ($1.6 billion) over the coming years by capping generous deductions for the gas industry. The cap will come into place on July 1.

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Chalmers said the government had wanted to ensure a “fair return” for Australians with the tax changes, while keeping in mind its international supply obligations. Both China and Japan voiced their concerns earlier in 2023 that changes by Australia’s center-left Labor government to ensure domestic gas supply would hamper its ability to fulfill foreign contracts.

Australia has already imposed a price cap on domestic gas sales to soften energy expenditure for consumers in the wake of the Ukraine war, as well as raising costs on new gas exploration by legislating tougher action to contain carbon emissions.

“We want to make sure that this really important industry for Australia can continue to services its international obligations and its domestic obligations, that we continue to see investment in this sector,” Chalmers said.

—With assistance from Georgina McKay.