A surge in mining industry profits and tax revenue have boosted Commonwealth coffers and allowed the Federal Government to forecast a bigger-than-expected surplus next year.
- Treasury says the improved financial position is due to increased tax revenue
- The forecast deficit for 2018/19 is cut from $14.5 billion to $5.2 billion
- The forecast surplus for 2019/20 is up from $2.2 billion to $4.1 billion
The Government has received $8.3 billion more than it expected in the first half of this financial year, thanks largely to greater collections of individual and company taxes.
It now expects to deliver a $4.1 billion surplus in 2019-20.
The Government Mid-Year Economic and Fiscal Outlook (MYEFO) projects wage growth below forecasts from the May budget.
The forecasted deficit for this year has been cut from $14.5 billion to $5.2 billion.
“The combination of a growing economy with a record number of people in work is helping both sides of the ledger — increasing our revenues, while also decreasing our expenditure,” Treasurer Josh Frydenberg said.
Exports are tipped to increase 2 per cent this year and 3.5 per cent in 2019-20.
That offsets a drought-inflicted 10 per cent drop in rural exports this year.
“The Australian Government’s books are the best in over a decade,” Mr Frydenberg said.
“Today’s update shows the Australian economy is on the right track, giving us much to look forward to.”
MYEFO forecasts election sweeteners
The MYEFO papers show the Government expects to bring in another $375 million in budget measures it is yet to announce.
But in a sign of the looming federal election, MYEFO includes $2.45 billion in foregone revenue in 2019-20.
The Government has refused to be drawn on what exactly these budget measures are but they are widely expected to be tax cuts that the Government is yet to announce.
This lost revenue will cost the budget $3.7 billion in 2020-21 and then $3 billion in 2021-22.
The papers also include $420 million in unannounced expenses for this financial year, and $738 million in unannounced expenses for 2019-20.
Housing investment is tipped to drop 4 per cent next year, coming after a 1 per cent increase this year.
“Housing price declines also present a downside risk to the outlook for dwelling investment,” the MYEFO papers state.
Ditching the Government’s planned tax cuts for large companies, having failed to gain crossbench support in the Senate, will bring in an extra $300 million next year.
That revenue will bring the Government an extra $700 million in 2020-21 and $1.1 billion in 2021-22.
Allowing backpackers to stay for an extra year and increasing the number of places available will deliver the coffers an extra $145 million next year, growing to $215 million in three years.
Labor says surplus built on luck
The Opposition said the Government could not take credit for the results.
“The improvements in this mid-year update are more a function of good luck than good management,” Labor finance spokesman Jim Chalmers said.
“They are courtesy of a strong global economy and nothing to do with the decisions taken by the Abbott or Turnbull or Morrison governments.”
The Treasurer and Prime Minister Scott Morrison have repeatedly said they would hand down a budget in April before going to an election in May.
But Mr Chalmers said he was not convinced that would happen after reading the MYEFO papers.
“The fact that they have put aside so much money for an election campaign is an admission that they are so divided and so dysfunctional and so chaotic that they might not even make it to an April budget,” he said.