Mid-Year Economic and Fiscal Outlook (MYEFO) 2017-2018
Treasurer Scott Morrison and Minister for Finance Mathias Cormann released the national Mid-Year Economic and Fiscal Outlook (MYEFO) today, declaring the Turnbull Government is “bringing the budget under control” and remains on track to achieve a surplus in 2020-21.
MYEFO shows the size of the 2017-18 underlying cash deficit will be $23.6 billion, an improvement of $5.8 billion since the Treasurer delivered the Budget in May, off the back of stronger than anticipated company tax collections. The predicted surplus for 2020-21 will be $10.2 billion, an improvement of $2.7 billion compared to the Budget estimate. The net operating balance is also expected to improve from a deficit of $18.2 billion in 2017-18 to a surplus of $6.8 billion in 2019-20, increasing to a surplus of $20.9 billion in 2020-21.
Net debt is forecast to stabilise at lower levels compared to the Budget, peaking at 19.2 per cent of GDP in 2018-19, before falling to 17.2 per cent of GDP in 2020-21, representing a decrease of $10.9 billion on previous estimates. Australia’s gross debt is projected to be $23 billion lower at the end of the forward estimates than was previously forecast.
The Treasurer noted the Government should now not have to borrow for recurrent spending from 2017-18, for the first time since the Global Financial Crisis, stating “These are the welcome dividends of prudent fiscal management and a growing economy”.
The update reveals real economic growth of 2.5 per cent this financial year, slightly below the Budget forecast of 2.75 per cent, increasing to 3 per cent across the forward estimates, as the drag from mining investment diminishes. MYEFO indicates growth will be driven by non-mining business investment, household consumption, public final demand and exports. Unemployment is predicted to fall from 5.5 per cent in 2017-18, to 5.25 per cent in 2018-19, and remain steady through to 2020-21.
The Government has confirmed it will be proceeding with a range of reforms to the higher education sector, including a freeze on total Commonwealth Grant Scheme funding at 2017 funding levels and a limit on tuition fee assistance under all HELP and VET Student Loans. The Government will also lower the minimum repayment threshold to $45,000 from 1 July 2018 and use Family Tax Benefit lump sums to repay outstanding social security, student assistance or Paid Parental Leave debts from 1 December 2018. Other revenue measures include a freeze on family tax benefits part A and B until 2019 and extending waiting periods for newly arrived migrants before they can access certain welfare benefits, achieving savings of $1.2 billion over four years.
MYEFO also includes $2.1 billion for new and amended listings on the Pharmaceutical Benefits Scheme; $1.3 billion to implement the Quality Schools reform package; and an additional $150 million in new funding for the Medical Research Future Fund.
Key economic indicator forecasts:
- Real GDP is forecast to grow by 2.5 per cent in 2017-18, increasing to 3 per cent in 2018-19
- Unemployment at 5.5 per cent in 2017-18, which is forecast to fall to 5.25 per cent by 2018-19
- Underlying cash deficit is expected to be $23.6 billion in 2017-18, before returning to a surplus of $10.2 billion in 2020-21
- Gross debt is expected to be $534 billion in 2017-18
- Net debt is anticipated to peak at 19.2 per cent of GDP in 2018-19
- Budget 2017-2018: Mid-Year Economic and Fiscal Outlook
- Media Release: 2017-18 Mid-Year Economic and Fiscal Outlook
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