The Conversation
16 Dec 2019, 05:47 GMT+10
The government has shaved its forecasts for both economic growth and the projected surplus for this financial year in its budget update released on Monday.
The Australian economy is now expected to grow by only 2.25% in 2019-20, compared with the 2.75% forecast in the April budget.
The projected surplus has been revised down from A$7.1 billion at budget time to $5 billion for this financial year.
By 2022-23 the surplus is projected to be tiny A$4 billion, a mere one fifth of one per cent of GDP, less than half the $9.2 billion projected in April.
Combined, $21.6 billion has been slashed from projected surpluses over the coming four years.
The revenue estimates have also been slashed, down from the pre-election economic and fiscal outlook (PEFO) by about $3 billion in 2019-20 and $32.6 billion over the forward estimates.
The changes this financial year reflect downgrades to superannuation fund taxes, the GST and non-tax receipts. The downgrade in later years reflects changed forecasts for individual taxes, company tax and GST.
The official documents sought to put as positive a spin as possible on the worse economic figures:
The revised figures forecast growth will be 2.75% next financial year.
The impact of the drought is reflected in the fact farm GDP is expected to fall to the lowest level seen since 2007-08 in the millenium drought.
The downgrades will fuel calls already being made by the opposition and some stakeholders and commentators for economic stimulus.
But the government, which since the budget has brought forward some infrastructure and announced spending on aged care and drought assistance, is continuing to resist pressure for stimulus now, wishing to hold out until budget time.
The budget update - formally called the mid-year economic and fiscal outlook (MYEFO) - contains more bad news for workers' wages.
Wages are forecast to rise in 2019-20 by 2.5%, compared with the forecast of 2.75% in the budget.
Employment growth remains at the earlier forecast level of 1.75% for this financial year, but the unemployment rate is slightly up in the latest forecast, from 5% at budget time to 5.25% in the update.
In its bring forward of new projects, the government is putting an extra $4.2 billion over the foreword estimates into new transport infrastructure projects.
Its extra spending on aged care will be almost $624 million over four years, in its initial response to the royal commission. This is somewhat higher than the $537 million announced by Scott Morrison in November.
While the projected surplus has been squeezed, the government continues to highlight the priority it gives it, saying that despite the revenue write downs, it expects cumulative surpluses over $23.5 billion over forward estimates.
Spending growth is estimated to be 1.3% annual average in real terms over the forward estimates. Payments as a share of GDP is estimated at 24.5% this financial year, reducing to 24.4% by 2022-23, which is below the 30 year average.
Treasurer Josh Frydenberg said the update showed "the government is living within its means, and paying down Labor's debt".
He said "the surplus has never been an end in itself, but a means to an end. An end which is to reduce interest payments to free up money to be spent elsewhere across the economy."
The government's economic plan was "delivering continued economic growth and a stronger budget position.
"MYEFO demonstrates that we have the capacity and the flexibility to invest in the areas that the public need most."
Author: Michelle Grattan - Professorial Fellow, University of Canberra
Get a daily dose of Raleigh Times news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Raleigh Times.
More InformationLONDON, UK: Crude prices surged this week as investors welcomed fresh signs of progress in U.S.-China relations, lifting hopes of reduced...
NEW YORK CITY, New York: Investor confidence in U.S. markets is showing signs of strain as global funds redirect billions toward Europe...
TOKYO, Japan: Japan has a new top sumo wrestler — and he's Japanese. Onosato, who weighs 191 kilograms (421 pounds), has become a yokozuna,...
LAS VEGAS, Nevada: Khaby Lame, the most followed person on TikTok with millions of fans, has left the United States after being held...
NEW YORK, New York - U.S. stocks tumbled Friday as the world was thrown into turmoil by unprecedented attacks by Israel on Iran. ...
NEW YORK CITY, New York: Paramount Global is cutting 3.5 percent of its U.S. staff as part of another round of layoffs. The company...
HARRISBURG, Pennsylvania: Amazon is making a significant play in Pennsylvania, announcing plans to pour at least US$20 billion into...
WASHINGTON, D.C. A public fight between U.S. President Donald Trump and billionaire Elon Musk has taken over social media, especially...
New Delhi [India] June 13 (ANI): Former England legendary seamer James Anderson said he's really enjoying playing T20 cricket, even...
President Donald Trump has vowed jail time for protesters who burn US flags, calling them paid insurrectionists Protests in Los Angeles...
London [UK], June 11 (ANI): The 'Ultimate Test' has come for David Bedingham. A man amongst the new crop of comparatively inexperienced...
Los Angeles [US], June 11 (ANI): California Governor Gavin Newsom condemned President Donald Trump's deployment of the military in...