Joe Hockey’s excellent Budget expectations management is throwing up a nice dividend:
Recent monthly government spending and taxation figures suggest the trend is already favouring this year’s budget. The Department of Finance on Friday reported a fiscal deficit for the seven months to January 31 of $27 billion, some $5.1 billion better than what was forecast in the mid-year economic and fiscal outlook.
According to Stephen Anthony, a budget expert at Canberra-based consultancy Macroeconomics, there was unlikely to be a “downside surprise” for the government over its key short-term economic predictions, which include a sharp drop in the terms of trade and rising joblessness.
Comparing previous patterns of federal spending and revenue with the trend so far this year suggests the budget may be better off by at least $10 billion in both 2013-14 and 2014-15, Mr Anthony said.
“Most of that is to do with parameter variations,” he said. “If you analyse the last three years of revenue and seasonal patterns, and expenses, you’ll end up with a deficit around the mid $30 billion mark.”
OK, so not in the black, exactly, but better versus expectations. I obviously disagree on the unlikelihood of a downside surprise for 2014/15 given my view that terms of trade will fall materially further than the Budget’s 5% forecast and my view that the capex cliff is not priced adequately either. But for now, it’s good work by the Government and will help support the consumer confidence that everyone is relying upon so heavily.
