|19 December 2016
Treasurer Scott Morrison and Minister for Finance Mathias Cormann released the national Mid-Year Fiscal and Economic Outlook (MYEFO) today, declaring that despite facing a number of economic challenges, the Federal Government remains confident of achieving a balanced budget in 2020-21 in keeping with its pre-election commitment.
Economic growth for this financial year has been revised down to 2 per cent, reflecting negative growth in the September quarter. However, economic growth is expected to lift slightly to 2.75 per cent in 2017-18 as the economic effects from reduced mining investments dissipate.
The MYEFO predicts a slight improvement in the underlying cash deficit at $36.5 billion (2.1 per cent of GDP) for 2016-17 and is forecast to fall to $10 billion (0.5 per cent of GDP) by 2019-20, while the fiscal deficit will improve from $41.5 billion (2.4 per cent of GDP) in 2016-17 to $6.4 billion (0.3 per cent of GDP) in 2019-20.
Gross debt is expected to be $496 billion at the end of 2016-17 and anticipated to reach $601 billion in 2019-20. Net government debt (gross debt minus the value of existing financial assets) is expected to be $317.2 billion (18.1 per cent of GDP) in 2016-17 and projected to peak at 19.0 per cent in 2018-19; the Government expects this will fall to 9.9 per cent of GDP ($284.7 billion) in 2026-27.
In terms of revenue, the Government has revised down its expected tax take by $3.7 billion for this financial year since the release of the Budget in May. Despite recent increases in commodity prices, revenue forecasts have been revised down by $30.7 billion over the next four years due to lower wage growth and falling profits from companies in sectors other than mining.
The MYEFO also outlines a number of Government initiatives to help achieve a budget surplus by 2020-2021, which includes reduced expenditure in a number of areas including termination of the Green Army environmental program (a saving of $224.7 million over four years from 2016-17) and halting the Asset Recycling Fund – as announced in the 2014-15 Budget – to redirect funds to the National Disability Insurance Scheme Special Account and reduce the Commonwealth’s debt and future borrowing requirements. The Government expects this decision will reduce gross debt by more than $10 billion by 2019-20.
As a revenue measure, the Government is increasing the value of the Commonwealth penalty unit (the amount payable for fines under Commonwealth law) from $180 to $210 from 1 July 2017. Also announced today is $1.6 million to establish the Black Economy Taskforce, which will propose actions to combat welfare fraud and tax avoidance, and which the Government hopes will have a net positive impact on the Budget over time. In delivering the national economic update today, Treasurer Morrison indicated that MYEFO “confirms the Government’s plan to restore the Budget to balance remains on track”.
Key economic indicator forecasts:
- Real GDP is forecast to grow by 2 per cent in 2016-17
- Unemployment at 5.5 per cent in 2016-17, which is forecast to fall to 5.25 per cent by 2018-19
- Underlying cash deficit is expected to fall from $36.5 billion in 2016-17 to $10.0 billion in 2019-20
- Gross debt is expected to be $496 billion at the end of 2016-17
- Net debt is anticipated to increase to $601 billion at the end of 2019-20