The Budget is on Trend for Surplus
The final figures for the 2017-18 revealed a deficit of just 0.6% of GDP. The deficit of $10.1 billion is the best outcome for a decade.
The big question is what will this good fortune be used for?
There are two choices: save it or spend it. Prime Minister Scott Morrison and Finance Minister Mathias Cormann are adamant that the budget parameters will be adhered to.
This means that all new spending measures will have to be accompanied by offsets and that the overall increase in expenditure will be limited to 2% real growth.
However there is every chance that, if the mid-year economic and fiscal outlook (MYEFO) shows the positive trend continuing, then the government will announce further tax cuts and some modest spending increases.
In the statement that accompanied the budget numbers, Treasurer Josh Frydenberg and Finance Minister Mathias Cormann said: “Stronger economic growth and much stronger employment growth than anticipated at the time of the 2017-18 budget have driven increases in personal income tax and company tax receipts, with total receipts $13.4 billion higher than expected at the time of the budget.
“Total payments were $6.9 billion lower than forecast at budget time, including as a result of lower welfare payments with more Australians in paid work. Welfare dependency for working age Australians is now at its lowest level in 25 years and in 2017-18, there were 90,000 fewer working age Australians on welfare,” they said.
This has led to the claim, enunciated by Greens leader Richard Di Natale at the Press Club on Wednesday, that the budget improvements were off the back of the most vulnerable in society: the disabled, the aged and the unemployed.
However the government argues that the reduction in the welfare spend is due to the fact that more people are now in work.
The budget outcome showed tax receipts were up $13.8 billion on the estimate in the 2017-18 budget.
As a percentage of GDP, taxes for the year were 22.7%, which is 1.1% higher than the year before, the biggest single jump since the GST was introduced in 2000.
Of the revenue increase, $6.8 billion extra came from company taxes, driven by higher-than-expected profits due, in part, to losses from the global financial crisis finally washing through the system.
For the same reason, superannuation fund taxes also exceeded estimates by $2.3 billion for the year.
Company taxes were also helped by tighter compliance rules and higher commodity prices coinciding with a buoyant global economy and company tax cuts in the United States.
The fact that revenue has grown so strongly puts the lie to the argument that big multinationals are evading taxes, an argument that Dr Di Natale was promoting at the Press Club on Wednesday.