The analysis team at Westpac explains that the Australian government forecasts the budget position to improve from a deficit of 2.1% of GDP in the 2016/17 financial year to a small surplus of 0.4% of GDP in 2020/21.
“Revenues are projected to lift by 2.2% of GDP over the four years, to 25.4% of GDP, and expenses are expected to inch lower by 0.1% of GDP over this period, to 25.0% of GDP. The budget consolidates by 0.5% of GDP in each of the four years, with the exception of 2019/20, when the budget improves by 1.0%. The accelerated consolidation in 2019/20 occurs as revenue initiatives make a more material contribution. The timing of a return to budget surplus in 2020/21 is unchanged from the previous forecast profile.”
“The economic outlook underpinning this fiscal profile is a relatively positive one. Real GDP growth is at trend or above across the forecast horizon and the terms of trade is not expected to have a substantially impact upon nominal GDP growth during this period.”
“Risks to the fiscal projections are twofold. First, that the economic outlook is too optimistic. Second, that revenues fail to increase as a share of the economy at the rate expected. Post the GFC the revenue share has remained stuck around 23.5% and the last time revenue hit 25% was in 2009/10.”