Australian Mid-year Economic and Fiscal Outlook

Sees 2016/17 deficit at A$36.5bn

  • An underlying cash deficit of $A37.1 billion was forecast in the May budget


  • Sees 2017/18 budget at A$28.7bn (was A$26.1bn in the May budget)
  • Sees GDP growth at 2% in 2016/17 (was forecast at 2.5% in the May budget)
  • Australia sees budget returning to surplus in 2020/21
  • Sees net debt peaking at 19% pf GDP in 2018/19

AUD has ground out a small gain on the MYEFO announcements

I dunno that this is an overly positive announcement.

Yes, the headline budget deficit for this year is projected to be smaller than was forecast in May, but for the years ahead the projections are for bigger deficits.

On the other hand (the more positive hand), the projection remains for a return to surplus in 2020/21, unchanged from May.

Enough to calm the fears of the ratings agencies and have them leave the AAA rating intact? Perhaps. The recent history of the credit ratings agencies seem generous to Australia. Says the Sydney Morning Herald:

  • Since 2009-10, Australia's last four treasurers - Wayne Swan, Chris Bowen, Joe Hockey and now Mr Morrison - have predicted a return to surplus 12 times but so far, none have delivered.


Added - a little more detail:

  • Combined deficits over the next four years will rise by around $11bn to $94.9bn
  • Tax Revenue down $3.7bn this year, & down by $30.7bn over four years
  • Net debt is projected to peak at 19 per cent of GDP in 2018-19, but will be $317bn this year and $363.8bn in 2019-20
  • Net interest payment is projected to rise from $12.3bn this year to $14.68bn in 2019-20
  • Employment growth marked down from 1.75 per cent (in the May budget) to 1.25 per cent
  • Unemployment rate is still predicted to be 5.5 per cent (it was 5.7% in last week's figures)
  • Spending as a share of GDP falls from 25.8 per cent to 25.2 per cent

An interesting point that expected employment growth has been marked down but the unemployment rate is also expected to fall. I guess the government is relying on a declining participation rate. Who would have thought that discouraging workers would be a key government policy plank?


Leading up to this:

Also, this from Friday: