Mid-Year Economic and Fiscal Outlook (MYEFO) 2019-2020

16 December 2019

Treasurer Josh Frydenberg and Finance Minister Mathias Cormann released the Mid-Year Fiscal and Economic Outlook (MYEFO) today, revealing revenue write-downs of more than $32 billion since the 2019 Pre-election Economic and Fiscal Outlook (PEFO) was released in April. The Government has attributed the downgrades to weaker global economic conditions, as well as domestic challenges, such as drought and bushfires.

The MYEFO confirms the Government remains on track to deliver a surplus of $5 billion this financial year, down from the $7.1 billion estimated at PEFO. The Government is also expected to deliver surplus budgets over the next four years, totalling $23.5 billion. Net debt is projected to peak at $392 billion in 2019-20, which represents 19.5 per cent of GDP, before improving across the forward estimates and medium term. The Treasurer said the MYEFO demonstrated the “resilience of the Australian economy” and the Government’s “responsible fiscal management”.

While economic growth is expected to fall by 0.5 per cent to 2.25 per cent in 2019-20, this is expected to strengthen again to 2.75 per cent by 2020-21. The Treasurer observed that GDP growth in the first three quarters of 2019 has been stronger than it was in the second half of 2018, and remains well above the OECD average of 1.6 per cent. The recovery in economic growth is expected to be driven by personal income tax relief and an increase in spending on infrastructure.

The mid-year budget update reveals that state government GST revenue will decrease by $9.9 billion over four years, including $1.8 billion this financial year.

While the MYEFO shows that labour market condition remains strong, the unemployment rate is expected to increase by 0.25 per cent 5.25 per cent this financial year, before returning to 5 per cent over the forward estimates. Wage growth has also been downgraded to 2.5 per cent.

To help stimulate the economy, the MYEFO includes an additional $4.2 billion in spending to accelerate transport infrastructure projects over the forward estimates, with more than a quarter of the infrastructure funding set to go to Queensland. The MYEFO also includes new funding to support drought affected communities and to strengthen the aged care system. The Government has indicated that it remains committed supporting a stronger economy, through policies that drive earnings and economic growth.

The Federal Labor Opposition has called on the Government to put forward a “comprehensive plan” to support the economy, describing the MYEFO as a “missed opportunity”.

Key economic indicators:

  • Real GDP is forecast to grow at 2.25 per cent in 2019-20
  • Unemployment is forecast to rise to 5.25 per cent
  • An underlying cash surplus of $5 billion is expected in 2019-20, with the cumulative underlying cash surplus downgrade from $45 billion to $23.5 billion over the forward estimates
  • Net debt is projected to peak at $392.3 billion in 2019-20, 19.5 per cent of GDP, and will decline over the forward estimates
  • The Government’s tax-to-GDP ratio remains below the cap of 23.9 per cent

Further Reading


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 Social media regulation

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UK Election

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