Inflation tipped to exceed 6 per cent this year

Consumers are expected to face higher prices throughout 2026 as inflation is projected to exceed 6.0 per cent.

According to the Pre-Election Economic and Fiscal Update, the increase will be driven by higher fuel prices and imported inflation linked to global supply disruptions and geopolitical tensions.

The report noted that annual headline inflation reached 1.8 per cent in March 2026, but pressures intensified in April when inflation rose to 3.9 per cent.

Global oil prices have risen sharply following tensions involving Iran and Israel and disruptions around the Strait of Hormuz.

Government said transport, electricity and food costs are likely to remain elevated during the year.

The report forecasts inflation will gradually moderate to around 3.0 per cent by 2028.

Govt spending to rise

Government spending is projected to remain above $4.8 billion in the next financial year despite efforts to reduce budget deficits and slow the growth of public debt.

The Pre-Election Economic and Fiscal Update forecasts total expenditure of $4.833 billion for the 2026-2027 financial year, equivalent to 33.1 per cent of Gross Domestic Product (GDP). Revenue is expected to reach $4.096 billion, resulting in a projected deficit of $736 million.

Of the total expenditure, operating spending is budgeted at $3.821 billion while capital expenditure is expected to reach just over $1 billion.

The update shows Government expenditure has increased significantly over recent years. Total spending stood at $3.414 billion in 2021-2022 before rising to $4.093 billion in 2024-2025. The latest budget projects spending will climb further to $4.833 billion.

For the first nine months of the current financial year, Government spent $3.294 billion, representing 69.4 per cent of the total budgeted expenditure. Operating expenditure reached $2.804 billion while capital expenditure totalled $489.7 million.

The report said the medium-term fiscal strategy seeks to improve the quality and efficiency of public spending while maintaining investment in infrastructure, economic growth initiatives and essential services.

Government expects expenditure to remain elevated over the next three years, with total spending projected at $4.895 billion in 2027-2028 and $5.060 billion in 2028-2029.

The update said future spending priorities would focus on strengthening public services, supporting inclusive development, promoting resilience and improving fiscal sustainability.