MYEFO 2018

They are the two rules that have defined the Coalition’s economic management – budget repair and a “speed limit on taxes”. On Monday, they found themselves on the final stretch of the collision course they have been hurtling down for years.

We now know how this crash will turn out.

The government’s own rule book, reprinted in Monday’s mid-year economic update states: “The overall impact of shifts in receipts and payments due to changes in the economy will be banked as an improvement to the budget bottom line.”

MYEFO reveals billions more in revenue, $9 billion in fresh election tax cuts

Peter Martin, The Conversation

Higher-than-expected company tax revenue and lower-than-expected spending have boosted the budget’s bottom line by A$14 billion over next four years, allowing it to forecast cumulative surpluses of A$30.4 billion, double what the budget predicted in May.

Modestly improved surpluses

The midyear budget update cuts the projected deficit for 2018-19 from a May estimate of A$14.5 billion to A$5.2 billion.

The surplus forecast for 2019-20 climbs from A$2.2 billion to A$4.1 billion. By 2021-22 the surplus is forecast to be A$19 billion, up from A$16.6 billion.



The surplus won’t reach the government’s long-term target of 1% of gross domestic product until 2025-26. And in projections out to 2028-29 it is not forecast to climb much above this target as the budget hits the Coalition’s self-imposed tax “speed limit” of 23.9% of GDP.



$9 billion in unannounced tax cuts

The budget boost would have been much bigger were it not for more than A$9 billion in “decisions taken but not announced”. Almost all of these are revenue decisions, presumably extra election tax cuts, worth A$2.5 billion to A$3.7 billion per year.

The budget papers say these are decisions taken since the May budget, and are either not for publication or haven’t yet been made public.




Read more:
More mirage than good management, MYEFO fails to hit its own targets


Treasurer Josh Frydenberg confirmed the government had taken decisions to do with tax, but said it would announce them at a time of its choosing rather than in the budget update.

It reserved the right to take other tax and spending decisions in the lead-up to the election. Some would be revealed in the 2019-20 budget, to be delivered in April rather than in May to allow an election in May.

Downgraded wage growth

Although the Treasury has revised up its estimates for revenue and revised down its estimates of unemployment, expecting the rate to fall to 5% by June 2019 and stay there, it has shaved 0.25 percentage points off its estimates for wage growth.

It now expects wages to grow by 2.5% in the year to June 2019 (down from 2.75%) and 3% in 2019-20 (down from 3.25%). In future years, it expects wage growth of 3.5%.



Addressing the downgrade, Mr Frydenberg said weaker-than-expected wage growth appeared to be part of a worldwide phenomenon, “not unique to us”.

Wage growth for the year to September was 2.3%, the highest since 2015. The statement said anecdotal evidence from Treasury’s business liaison program pointed to “skills shortages and wage pressures in some sectors of the economy, consistent with a tightening labour market”.

Weaker consumer spending, economic growth

Growth in consumer spending has also been revised down, from 2.75% in 2018-19 to 2.5%. It is expected to climb back to 3% in 2019-20.

The statement revises down the government’s forecast of economic growth in 2018-19 from 3% to 2.75%, in part because of the Queensland drought, but predicts growth of 3% in 2019-20, 2020-21 and 2021-22, a touch higher than the Treasury’s estimate of long-term sustainable growth.

But debt has peaked and is headed down

The updated figures show net debt has already peaked as a proportion of GDP and will fall faster than previously expected, in line with higher surpluses, sliding from 18.2% of GDP to 1.5% over the decade to 2028-29.



Government receipts are expected to climb from 24.9% of GDP to 25.5% by 2021-22. Payments are expected to fall from 24.9% of GDP to 24.6%.

Mr Frydenberg said the Coalition had kept average real spending growth at 1.9% per year, well below Labor’s 4% over six years which included the global financial crisis.



Finance Minister Mathias Cormann said recurrent spending had fallen below recurrent revenue for the first time in more than a decade.

Recurrent spending excludes spending on long-term investments in things such as road and rail infrastructure.

He said all new spending since the May budget had been offset by spending cuts elsewhere.

No firm commitment on fiscal discipline

Asked whether he felt bound by a commitment in the budget papers to bank rather than spend improvements to the budget’s bottom line due to changes in the economy, Cormann said it was “a matter of balancing priorities”.

The imperative to cut tax to keep it below the government’s self-imposed speed limit might conflict with the commitment to devote extra tax takings to improving the bottom line.




Read more:
Monday’s MYEFO will look good, but it will set the budget up for awful trouble down the track


The Conversation


Peter Martin, Editor, Business and Economy, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The 2019 Budget entrenches neoliberal inequality

0
I’ve listened hard for the sound of wealth trickling down but all I hear is the sound of the excluded still waiting Amid the fanfare...

Sam Dastyari: Riding the red dragon express not a good look

0
The federal parliament is the most important in Australia. It's also more open to corruption than any State parliament. Icac recommends criminal charges against Joe...

Folie-a-deux: Reliance on Peta Credlin disabled, but did not kill, Tony...

0
Jack Waterford, Canberra Times columnist March 11, 2016 The most poignant, believable and prophetic movement of Niki Savva's Shakespearean tragi-comedy of the downfall of Tony Abbott is...

Adani – Interactive cost, environmental impacts, jobs and the future

0
Interactive: Everything you need to know about Adani – from cost, environmental impact and jobs to its possible future ABC News: Nationwide, a majority of voters...

The petition: Stop Future Entitlement Rorts.

0
Click on this link to Petition to Prime Minister Malcolm Turnbull. Reject the 2016 Report of Independent Committee Review into Parliamentarian's Entitlements. The Report is both...

How one think tank poisoned Australia’s climate debate

0
One of the Institute of Public Affair's greatest successes has been to stitch climate denialism into the very fabric of the conservative political identity. From...

Dirty Coal Peddlers

0
The coal industry has infiltrated Australia's federal government through a secretive network of ties, working to influence Australia’s political decisions at the highest level:...

How a power station sold for peanuts became a $730 million...

0
It might rank as the deal of the century — but an appalling result for New South Wales taxpayers. In November 2015, the NSW Government...

It all begins again. Politicians chasing money and donors

0
Do we want or deserve neo-liberalism ? It all begins again The retirement announcement of Julie Bishop, late on Thursday afternoon, was a signature Bishop move....

The 2019 Pork Barrel Election

0
Captains pick Ita Buttrose has been noticeably quite since she was elected unopposed after rigorous selection processes Global recruitment firm Korn Ferry started the recruitment...

Murray Darling Basin disaster. Why?

0
Nationals leader and acting PM brushes off suggestions government could do more to solve Menindee Lakes crisis, saying ‘that’s Australia’ Michael McCormack has brushed off...

Political donations in Australia: Snapshot 2

0
Infographic: a snapshot of political donations in Australia Emil Jeyaratnam, The Conversation; Michael Courts, The Conversation, and Reema Rattan, The Conversation CC BY-SA Catch up on other...

Viewpoint: What’s in half a degree of climate change?

0
Viewpoint: What's in half a degree of climate change? Our dual needs to save the planet and power our modern lives have thrown a spotlight on...

‘Staggering’: $90 billion lost in resources tax

0
'Staggering': $90 billion lost in resources tax By Eryk Bagshaw 12 March 2018 — 3:47pm An Oxford University expert says Australia would be $90 billion better off if...

Senior ministers deal death blow to Malcolm Turnbull’s prime ministership

0
Senior ministers deal death blow to Malcolm Turnbull's prime ministership Michaelia Cash and Mathias Cormann have delivered the death blow to the prime ministership of...
Web Hosting