Is the Budget, via AFR:
The Morrison government is sticking to its plan, for now, to reach a budget balance in 2019-20, rather than race to an early surplus.
This follows a decision to fund billions in pre-election promises with extra revenue from a growing economy, rather than through spending cuts, which was the original self-imposed budget rule.
A surge in revenues is expected to result in the forecast deficit of $18.5 billion for last financial year to be about $10 billion when the final budget numbers for 2017-18 are released today. The deficit in the 12 months to the end of May was $12.8 billion, as calculated by budget economist Chris Richardson of Deloitte Access Economics, using monthly budget updates provided by the government.
The economy has grown faster than expected this year thanks largely to the ravaging of the public interest embedded in “asset recycling” at the state level plus higher terms of trade than forecast:
- Underlying cash deficit of $10.1 billion versus $18.2bn billion forecast
- Total revenue was $456.3 billion, $11.9 billion higher than budget estimate
- Tax collected was $427.4 billion, $12 billion higher than expected
- Total expenses were $460.3 billion, $4 billion under the estimate
Income tax and capital gains taxes are going to miss in the forward estimates as the economy slows below forecast but for the next year that is probably not going to matter. Forward estimates for bulk commodities are too low and will offset other drags after China’s new round of stimulus.
Iron ore is about right at $67CFR, if a little high. The real saviour is coal. Thermal coal is trading at $115 and coking $199 versus $93 and $120 in the Budget. These two alone flood the Budget with $5-6bn in extra revenue that forecast.
The problem is that this is now the only functional nexus left between dirt extraction and ordinary Australians. The stock market channel is not very big. And what used to be the largest channel, higher prices triggering investment and wage gains, is fatally broken.
That means that the Budget is itself caught between warring responsibilities. It should aim to save windfall commodity gains but with the wider economy so leeched of income, the only return households see on rising commodity prices is tax cuts.
It’s just another example of Australia’s broken economic structure. We’re still too fat to compete in non-resource exports and imports to spread income gains which guarantees a dependence upon dirt to pay the national bills. Meanwhile dirt distorts public policy to keep it that way.
It’s Banana Republic dynamics.
