The federal government is now forecasting a $3.1 billion budget surplus in three years’ time, larger than the $1 billion estimate in the May budget.
Treasurer Wayne Swan released an economic statement yesterday revising economic forecasts and the nation’s budget position during the next four years.
Buried in it was the cost to revenue of the resources tax backflip, some $7.5 billion in revenue forgone by Canberra.
The political nature of the announcement was underlined by the continuing speculation that Prime Minister Julia Gillard may call a Federal election by the weekend.
Mr Swan said the statement showed an improvement in the projected surplus, as well as dramatically lower debt than any other major advanced economy.
"These strong results come despite increased uncertainty around the global economic outlook arising from sovereign debt issues in Europe in particular and an uneven global economic recovery," he said.
Despite this spin, growth forecasts have been cut to 3% for this financial year (down 0.25%) and 3.75% in the year to June 2012 (also down 0.25%).
The government is sticking to a jobless rate of 4.75% in late 2011-12, but that implies very little growth in the jobs market over the next two years as the unemployment rate was just 5.1% in June.
The reason for the revenue boost is explained by the forecast that the terms of trade for this financial year will rise a record 17%, much higher than the 14.25% forecast in the May budget.
But the terms of trade will fall from 2011-12 onwards (and will be falling towards the end of the current financial year).
Inflation is forecast to be 2.75% this current financial year and 2012, up a quarter of a per cent from the May budget forecasts.
Since the budget, taxation receipts have been revised up by about $310 million in 2010-11 and about $7.8 billion during the four years to 2013-14.
"A stronger outlook for commodity prices is reflected in higher than otherwise taxes on resource rents and company profits," the statement said.
The recently negotiated minerals resources rent tax and expanded petroleum resources rent tax is expected to bring in $10.5 billion in its first two years of operation – $4 billion in 2012-13 and $6.5 billion in 2013-14.
But those estimates are so far in the future as to be meaningless.
Federal Treasurer, Wayne Swan said yesterday the return to Budget surplus in 2012-13 will be ahead of any of the major advanced economies.
"This represents the fastest fiscal consolidation in Australia since at least the 1960s and puts Australia at the forefront of global fiscal consolidation efforts.
"The Government remains committed to maintaining strict budget discipline; including restricting real spending growth to 2 per cent a year on average until the surplus has reached 1 per cent of GDP.
"Australian Government net debt is expected to peak slightly lower than anticipated at Budget at 6 per cent of GDP in 2011-12, and fall to 5.3 per cent of GDP by the end of the forward estimates.
"In comparison, the collective net debt of the major advanced economies is expected to reach 94.2 per cent of GDP in 2015," Mr Swan said.
