The week that was
The Government released the Mid Year Economic and Fiscal Outlook which showed the budget deficit for 2017-18 was a little lower than expected at Budget time back in May. Stronger company tax payments and higher superannuation taxes accounted for all of the changes to the revised deficit forecast of $23.6 billion (was $29.4 billion) for 2017-18.
The forward estimates show almost no change in deficits in 2018-19 and 2019-20 and still only a moderate surplus in 2020-21. This profile of a return to surplus remains heavily dependent on a strong pick up in wages growth over the next few years, even though the wages for wages growth were trimmed by around 0.25 per cent per year. With the gradual return to surplus, the growth in net government debt is projected to top out in 2019 at 18.9 per cent of GDP. The government had net financial assets (the opposite of debt) amounting to 3.4 per cent of GDP in June 2008.
The economic story underpinning this gradual return to surplus is upbeat – GDP growth of 2.5 and then 3 per cent in the next few years, an acceleration in wages growth and a pick up in inflation. Any shortfall in this positive economic performance would risk undermining the surplus in 2020-21.
The week ahead