Transcript Slide 1

The 2012/13 Budget and the
Australian Economy
Moir Group
May 9, 2012
John Edwards
Visiting Fellow, Lowy Institute
The Quiet Boom
Australia’s wealth
Jobs
Manufacturing and mining
Household consumption
Home building
Investment Upswing
Mining investment
Investment by sector
Investment pipeline
Household saving
Gross Household Saving
Housing credit growth
Business credit growth
Slowdown in employment growth
Slower GDP growth
Lower inflation
Key Budget Measures
– Carry back of up to $1m in business losses against
tax paid on former profits, from July 1
• Corporate tax cut shelved
– Doubling super contributions tax on incomes over
$300,000
– School rebates and a dental scheme for low to
middle income families
– Carbon tax-funded compensation
– National disability insurance
– Increased family benefit from July 1 2013
The 2012/13 Budget
• Returns to surplus of $1.5bn from deficit of $44.4bn, a
turnaround of 3% of GDP
– Revenue up 1.5% of GDP, spending down 1.6% of GDP
• But contractionary impact mitigated
– Payments in last months of 2011/12 will be spent in 2012/13
– Some major spending cuts have little domestic impact e.g.
foreign aid, defence
– Some tax increases have little spending implication e.g.
superannuation, corporate tax cut shelved
• Major revenue increase from existing tax plus MRRT,
carbon tax etc.
• Some major program payments to begin next July 1 2013
– $1.8bn increase in Family Tax Benefits A
deficit of $44.4 billion (3.0 per cent of GDP) in 2011-12 (Table 1).
Table 1: Budget aggregates
Actual
Estimates
Projections
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Underlying cash balance ($b)(a) -47.7 -44.4 1.5 2.0
5.3 7.5
Per cent of GDP
-3.4
-3.0 0.1 0.1
0.3 0.4
Fiscal balance ($b)
-51.5
Per cent of GDP
-3.7
(a) Excludes expected Future Fund earnings.
-42.0
-2.8
2.5
0.2
2.6
0.2
7.0
0.4
9.5
0.5
This Budget spreads the benefits of the mining boom to help over 1.5 million families
by growth in private demand.
Table 2: Major economic parameters
(a)
Forecasts
Projections
2011-12 2012-13 2013-14
2014-15 2015-16
Real GDP
3
3 1/4
3
3
3
Employment
1/2
1 1/4
1 1/2
1 1/2
1 1/2
Unemployment rate
5 1/4
5 1/2
5 1/2
5
5
Consumer price index
1 1/4
3 1/4
2 1/2
2 1/2
2 1/2
Nominal GDP
5 1/2
5
5 1/4
5 1/4
5 1/4
(a) Real and nominal GDP are year-average growth. Employment and CPI are through-the-year growth to
the June quarter. The unemployment rate is the rate for the June quarter.
Global financial market tensions eased in the early months of 2012, after the period of
Statement 2: Economic Outlook
Table 1: Domestic economy forecasts(a)
Forecasts
Outcomes(b)
2010-11
2011-12
2012-13
Panel A - Demand and output(c)
Household consumption
3.1
3 1/4
3
Private investment
Dwellings
3.0
-1
0
Total business investment(d)
5.6
18
12 1/2
Non-dwelling construction(d)
8.8
25
14
Machinery and equipment(d)
3.0
16 1/2
12 1/2
Private final demand(d)
3.3
6
5
Public final demand(d)
3.4
1 1/2
- 1/2
Total final demand
3.3
5
3 3/4
Change in inventories(e)
0.5
0
0
Gross national expenditure
3.8
5
4
Exports of goods and services
0.2
4
4 1/2
Imports of goods and services
10.4
12 1/2
7 1/2
Net exports(e)
-2.0
-2
- 3/4
Real gross domestic product
2.0
3
3 1/4
Non-farm product
1.9
3 1/4
3 1/4
Farm product
7.1
-6
2
Nominal gross domestic product
8.3
5 1/2
5
Panel B - Other selected economic measures
External accounts
Terms of trade
20.6
3 1/4
-5 3/4
Current account balance (per cent of GDP)
-2.4
-3
-4 3/4
Labour market
Employment (labour force survey basis)(f)
2.2
1/2
1 1/4
Unemployment rate (per cent)(g)
4.9
5 1/4
5 1/2
Participation rate (per cent)(g)
65.5
65 1/4
65 1/4
Prices and wages
Consumer price index(h)
3.6
1 1/4
3 1/4
Gross non-farm product deflator
6.0
2 1/2
1 3/4
Wage price index(f)
3.8
3 1/2
3 3/4
(a) Percentage change on preceding year unless otherwise indicated.
(b) Calculated using original data unless otherwise indicated.
(c) Chain volume measures except for nominal gross domestic product which is in current prices.
(d) Excluding second-hand asset sales from the public sector to the private sector.
(e) Percentage point contribution to growth in GDP.
(f) Seasonally adjusted, through-the-year growth rate to the June quarter.
(g) Seasonally adjusted rate in the June quarter.
(h) Through-the-year growth rate to the June quarter.
2013-14
3
2 1/2
8
7 1/2
8 1/2
4 1/4
0
3 1/4
0
3 1/2
4 1/2
5 1/2
- 1/2
3
3
1
5 1/4
-3 1/4
-6
1 1/2
5 1/2
65 1/4
2 1/2
2 1/4
3 3/4
The sustainability of Government finances has also been improved as many of the
budget savings identified deliver continuing benefits to the bottom line beyond the
forward estimates.
FISCAL OUTLOOK
An underlying cash surplus of $1.5 billion (0.1 per cent of GDP) is expected in 2012-13,
largely unchanged from the estimate at MYEFO. In accrual terms, a fiscal surplus of
$2.5 billion (0.2 per cent of GDP) is expected for 2012-13.
Table 4: Australian Government general government sector budget aggregates
Receipts(a)
Per cent of GDP
Actual
2010-11
$b
302.0
21.6
2011-12
$b
330.0
22.3
Estimates
2012-13
$b
368.8
23.8
2013-14
$b
392.5
24.0
Payments(b)
Per cent of GDP
346.1
24.7
371.3
25.1
364.2
23.5
387.3
23.7
404.9
23.5
427.3
23.6
3.7
3.0
3.0
3.2
3.4
3.7
Underlying cash balance(c)
Per cent of GDP
-47.7
-3.4
-44.4
-3.0
1.5
0.1
2.0
0.1
5.3
0.3
7.5
0.4
Revenue(a)
Per cent of GDP
309.9
22.1
336.4
22.8
376.1
24.2
402.2
24.6
424.8
24.7
449.6
24.8
Expenses
Per cent of GDP
356.1
25.4
373.7
25.3
376.3
24.3
398.5
24.4
416.4
24.2
439.0
24.2
Net operating balance
Net capital investment
-46.2
5.3
-37.3
4.7
-0.2
-2.7
3.7
1.0
8.4
1.4
10.5
1.1
Fiscal balance
Per cent of GDP
-51.5
-3.7
-42.0
-2.8
2.5
0.2
2.6
0.2
7.0
0.4
9.5
0.5
Future Fund earnings
Projections
2014-15 2015-16
$b
$b
413.6
438.4
24.0
24.2
Memorandum item:
Headline cash balance
-51.1
-48.4
-8.7
-6.8
-0.1
2.0
(a) Includes expected Future Fund earnings.
(b) Equivalent to cash payments for operating activities, purchases of non-financial assets and net
acquisition of assets under finance leases.
(c) Excludes expected Future Fund earnings.
Underlying cash balance estimates
The increase in the estimated 2011-12 underlying cash deficit since MYEFO is largely a
result of changes in economic circumstances reducing tax receipts, as well as new
policy decisions that have increased payments including the Schoolkids Bonus and the
bring forward of payments for local government services.
A small underlying cash surplus of $1.5 billion is expected in 2012-13. The downward
revision to total parameter and other variations of just under $2.9 billion since MYEFO
has been offset by policy decisions of just over $2.9 billion.
The declared strategy
“Consistent with the fiscal strategy, the return to
surplus is being achieved through a combination
of targeted and responsible savings and allowing
the natural increase in tax receipts associated
with a strengthening economy to flow through
to the budget.”
Multi factor productivity
Labour productivity
Capital productivity
Contribution to output growth
Inputs of capital, labour
Gross National Saving
Household Consumption
Mining output