The Federal government is set to release the Mid Year Economic and Fiscal Outlook on Monday which will provide up to date news on the budget and Treasury’s view on the health of the economy.
In the budget in May, Treasury was forecasting a slow and steady narrowing in the budget deficit with a surplus finally on the cards for 2020-21 (see chart). Since then, the flow of news has generally been favourable for the budget bottom line with solid growth in employment helping, at the margin, to deliver a little extra income tax, and more importantly, a higher than expected level for commodity prices delivering a lift in company profits and hence company tax. These effect of these is set to reduce the deficit by around $4 to $5 billion per annum which could see a small surplus in 2019-20 and a surplus above $10 billion in 2020-21.
It appears this is what the government is banking on when it is flagging the idea of income tax cuts in the lead into the next election.
Source: RBA, Treasury
