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Pre Budget Preview
Key points of the pre budget preview are:
*The pre-budget run-up this year has been somewhat unusual as there has not
been much in the way of pre-budget leaks. Rather the focus has been on the Henry
Tax Review and the Government’s response. But it would be a very unusual budget
without some new initiative, especially given that this is an election year.
*With Australia’s economy exceeding expectations, the Federal budget position
has improved since the Government’s Mid Year Economic & Fiscal Outlook (MYEFO)
(November 2, 2009).
*Expected budget deficit of approx $55bn in 2009/10, just $3bn lower than in
MYEFO, with the deficit narrowing further to $30bn (2.2% of GDP) in 2010/11,
about $17bn less than expected at MYEFO. This improvement continues into
2011/12, –$10bn or a $21bn improvement on MYEFO, and we could even see a small
surplus in 2012/13 ($18bn less than an MYEFO).
*The record high in commodity prices, in particular coal and iron ore, are
behind the broad fiscal improvement. So much so that prospects are for nominal
GDP growth of 8% in 2010/11 (up from 5.5% in MYEFO) and arguably for 7% in
2011/12 (up from 6.25% in MYEFO).
*The dislocation in global financial markets has the potential to derail these
forecasts. The Government’s response to the Henry Tax Review assumed that by
2013/14 commodity prices will be “around current levels”. Expect the Government
to use the same estimates in the Budget projections.
*Expect an announcement of only modest net new spending initiatives on the
night, which from a presentational point of view could be described as austere..
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*The information found on this website is for informational
purposes on general financial advice. It is not comprehensive advice nor
suited to your individual needs. We strongly recommend that
you consult your financial adviser or accountant for more in-depth and
individual guidance.
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