Mid-Year Economic and Fiscal Outlook (MYEFO) 2018-2019
The Budget is forecast to improve from a deficit of $5.2 billion this financial year to reach a surplus of $4.1 billion in 2019-20, with a surplus predicted to reach 1 per cent of Gross Domestic Product (GDP) by 2021-22. This predicted underlying cash deficit has fallen from the significantly higher figure of $14.5 billion forecast in the May Budget, and represents the lowest deficit since prior to the Global Financial Crisis.
Over the four years from 2018-19, the underlying cash surplus is expected to rise to $30.4 billion – almost double the May Budget estimate. Treasurer Frydenberg said the return to surplus was a result of “the strong economy and the government’s sound fiscal management”, with stronger-than-expected collections from individual taxes and company tax and a surge in mining industry profits.
These results follow a period of slow wage growth and unexpected downturn in economic growth during the September quarter, when GDP growth fell to the lowest rate in two years. Today’s figures rely on a predicted rise in mining investment and increases in household consumption and non-mining business investment. Meanwhile, “subdued household income growth, tighter-than-expected credit conditions and housing price falls could cause consumer spending and dwelling investment to be weaker than forecast”, according to the MYEFO.
The figures reportedly accommodate a yet-to-be-announced suite of tax cuts and increased spending in the lead up to the next Federal Election. When asked about the Government’s tax plans, Minister Cormann commented that “It is no secret we are committed to lower taxes as part of our plan to strengthen the economy, create more jobs and ensure that Australians have the best possible opportunity to get ahead”.
Treasury’s updated forecasts have revealed that GDP is expected to grow by 2.75 per cent this financial year, downwardly revised from the previous Budget forecast of 3 per cent. The drop has been attributed to falling agricultural exports on account of drought conditions in the eastern and southern states, but is predicted to rise to 3 per cent the following year and continue to rise over the forward estimates.
Notably, the Government has announced more than $552 million in additional funding for aged care services, which will provide for an extra 10,000 high-level home care packages to facilitate in-home nursing and related services. The funding will also provide for an additional 5,000 level three and 5,000 level four care packages.
Key economic indicator forecasts:
- Real GDP is forecast to grow by 2.75 per cent in 2018-19.
- Unemployment is forecast to hold at 5 per cent over the forward estimates.
- An underlying cash deficit of $5.2 billion is expected in 2018-19, before improving to a forecast surplus of $4.1 billion in 2019-20 and $19.0 billion in 2021-22.
- Net debt is anticipated to fall from 18.2 per cent of GDP in 2018-19 to 14.3 per cent by 2021-22, reaching a low of 1.5 per cent by 2028-29.
- Budget 2018-2019: Mid-Year Economic and Fiscal Outlook
- Media Release: 2018-19 Mid-Year Economic and Fiscal Outlook
A new Governor-General
In other news, former senior Army officer and current Governor of NSW, His Excellency General the Hon David Hurley AC DSC (Retd), has been appointed the next Governor-General of Australia. The Prime Minister described General Hurley as his “first and only choice” to replace current Governor-General Sir Peter Cosgrove, who will remain at his post until General Hurley is sworn in on 28 June 2019.
Integrity Commission announced
In response to ongoing calls for a federal anti-corruption watchdog, the Government last week announced it will establish a Commonwealth Integrity Commission. The independent statutory authority will include a law enforcement integrity commissioner, a public sector integrity commissioner and an overarching commonwealth integrity commissioner, but will not publish its findings or convene public hearings, instead referring matters directly to prosecutors.
National Labor Conference
The ALP National Conference convened in Adelaide on the weekend, with 400 party delegates and around 1,000 observers meeting to discuss issues such as education, migration, the Newstart Allowance, asylum seekers and infrastructure policy. Climate change activists interrupted Bill Shorten’s address on Sunday to protest the proposed Adani coal mine in Queensland. The conference will run until Tuesday.
Andrew Broad resigns from frontbench
Nationals MP Andrew Broad has resigned from his position as Assistant Minister to the Deputy Prime Minister today, following allegations of improper conduct published by New Idea magazine. Deputy PM Michael McCormack confirmed that Mr Broad will remain as an “effective and hardworking” representative for Mallee, a safe Coalition seat in regional Victoria.