BUDGET TRACKING AND THE AUSTRALIAN ECONOMY
By Rebecca Lowe
Each month, Government budget data is released with the Federal budget outcomes influenced by how the Australian economy is tracking. Budget data is now available for December 2017 with an overall consensus that the budget is in ‘good shape’.
In the December Mid-Year Economic and Fiscal (MYEFO) outlook, which updates the economic and fiscal outlook from the previous Federal budget, budget plans were revised to reflect a $5.8 billion reduction in the budget deficit for 2017/18 to $23.6 billion. This latest data shows that the budget deficit is around $1.9 billion smaller again than the recently revised expectations.
The data released provided the following insights into the economy.
Nominal GDP growth remains solid
Nominal GDP growth remains on track, evidenced by the annual rate of tax revenue growth remaining reasonably high and annual growth in company tax revenues particularly strong. Commodity prices remain well above the most recent low point (in late 2015) and this supports mining company profits and has a flow on effect to other businesses. Solid infrastructure spending by State and Federal Governments is also boosting profits for companies in this sector.
Wage growth is trending up
Strong growth in PAYG receipts per employee has been trending higher, with higher tax receipts typically acting as a good leading indicator for wages growth.
The labour market is strong
The Australian labour market is strong, with annual employment growth of around 3%. During 2017 an additional 403,100 new jobs were created, with over three quarter of these jobs full-time positions.
Consumer spending picked up
Retail trade rose 1.1% in nominal terms in the December quarter, leading to growth in GST collections.
Government spending will contribute to growth
The strong pipeline of infrastructure work around the country means public capital expenditure will add to growth in 2018, with an additional positive contribution from government consumption spending, assisted by the rollout of the National Disability Insurance Scheme.
With the 2018/19 Federal Budget scheduled to be delivered on the 8th May 2018, these indicators show the country should remain on target for a small surplus position in 2020/21.
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