Australian Treasurer Josh Frydenberg confirmed this week that the economy is on track to record its lowest deficit in a decade, as welfare spending has reduced enough to pull off a surplus in the next fiscal year.
Tax receipts were a whopping $13.4bn higher than ministers were predicting, which will give a huge lift for next year’s forecasts if current trends hold up.
The deficit in the Australian economy is now just $10.1bn, a figure that has not occurred since before the global financial crash back in 2008. This suggests that Australia’s shoots of recovery are finally coming into bloom.
The news comes at a great time for Scott Morrison, the former Treasurer who became Prime Minister in August. These promising economic figures should allay nagging worries over the state of the current mortgage lending circuit.
Frydenberg said that these results vindicate the government’s economic plan and display clear confidence in the underlying strength of the economy. This news dovetails with optimism that next year’s budget will find a balance or even a surplus, as spending growth in real terms dropped to figures last seen half a century ago.
The Treasurer also admitted that there is little chance of the Australian government shunning its policy that any increases in spending would need balancing by savings elsewhere, given that it has worked thus far. However, the ruling Liberals are in line for some criticism by the Labor Party, which said that the former’s commitment to budget discipline is slipping in the wake of positive economic performance.
The results also showed just how far actual returns were from forecasts, which will come as a surprise to many investors and policymakers expecting a more difficult deficit figure to contend with. The estimated $29.4bn deficit forecast compared to the actual $10.1bn deficit suggests that Australia’s economic indicators may not be as efficient as previously thought. Some of the inaccuracies were also due to unused extra contingencies.
Another reason for improvement came from a decrease in how much the government expected to pay out for running the state, which was $6.9bn less than predicted. The Future Fund also saw a higher intake than analysts expected, coming in $1.1bn higher.
Some of these lower payments came down to fewer people applying for the National Disability Insurance Scheme (NDIS) than anticipated, while unexpected delays to infrastructure projects across various states and territories meant the non-allocation of certain funds.
NDIS payments were down by $2.5bn, which reflects lower participation and payouts for the average individual than the government previously forecast.
The slow implementation of an increase in pension age also put some extra funds back in Treasury coffers, as some $894m was unclaimed this fiscal year due to the age changing from 65 to 67.
Improvements to the economy also saw additional savings, as payments to families in tax credits reduced. This figure came down by $790m, with the government needing to pay out less on average as household affordability began to increase.
A stronger labor market also saw positive returns due to reductions in both unemployment and underemployment, which allowed jobseeker funds to come down by $335m.