Analysts at National Australia Bank (NAB) provides insights on what to expect from the upcoming Australia’s federal government budget due to be announced later on Tuesday.
“We expect an underlying cash balance of $23-25bn in 2017-18, some $4-6bn better than predicted at the Mid-Year Budget review (MYEFO).”
“The Government is likely to continue to focus on gradual improvement in the balance, so as to build fiscal flexibility, maintain the AAA credit rating (which we think is unlikely to be affected after this Budget) and not upset the recovery.”
“The global economic backdrop is improving which will be helpful. Most focus/debate is likely to be over the extent to which the government assumes wages growth and consumption will strengthen, given current low wages growth.”
“The Treasurer has already re-committed to using conservative commodity price assumptions, which is good practice and delivered an upside surprise last year in place of the downside surprises that have been commonplace in the past 4-5 years.”
“Three initiatives likely in this budget are: (i) a Housing Affordability package; (ii) an increased focus on the Net Operating Balance (which compares recurrent expenditures and revenues); and (iii) a related categorization of debt into good and bad debt, the latter designed to highlight that borrowing is OK for infrastructure and productivity-enhancing purposes, but not for day-to-day spending.”
“It’s also quite likely that the Government will announce or foreshadow increased infrastructure spending (eg Sydney’s Second Airport, the Inland Rail project), some of which may be “off-budget”.
“Ratings agencies will likely continue to focus on general government sector debt when considering Australia’s AAA rating, not government business enterprises, such as the NBN.”