FY 2019, On RBA Economic Upgrade A Closer To Surplus Budget Is Expected

  • Nov 08, 2018 AEDT
  • Team Kalkine
FY 2019, On RBA Economic Upgrade A Closer To Surplus Budget Is Expected

It is expected that the federal budget will be about $5 billion a year. This result seems more contented and is moving at a faster rate. If the Treasury also adopts a bullish forecast in a similar way to the Reserve Bank of Australia, then Australia’s economy will be a rosy economy.

On Tuesday, the RBA stated there was a growth of 3.5% this year and said that year 2019 is expected to experience economic growth of 3.25% which is slightly more than the estimates of the central bank.

John Frydenberg who is the treasurer of RBA, celebrated the positive outlook of RBA for economic growth and employment. This happened after he met the board members of the central bank. 

The forecasting of treasury is based on the financial year whereas forecast of the central bank is based on the calendar year.

Chris Richardson who is Deloitte Access Economics partner states that as per the rough estimate of RBA, the economy will be increase by 1% by the end of year 2019 as compared to the Treasury's May budget forecast.

Mr. Richardson said that other things will remain the same that is required to improve the budget’s bottom line. As per the May budget forecast, this fiscal year will experience an underlying cash deficit of $14.5 billion. There will be a small positive balance of $2.2 billion for the period 2019-20.

As per the Treasury forecast this year, the average real (inflation-adjusted) GDP growth in FY2018 will be 2.75% and will be 3% in FY2019. The Nominal GDP which is basically used to determine the revenue through the budget taxation is not adjusted for inflation. Based on this parameter, the RBA does not forecast.

Mr. Richardson highlights the good and the bad news - both. The good news in terms of profits especially in coal and bad news in term in terms of wages.

This year the government sources have constantly moderated the prospect of a surplus. As per the private sector budget, experts are growing more optimistic that the bottom line could be slightly in the black in FY2018.

The update regarding the budget forecast will be presented by the government in mid-December once the September quarter national accounts gets published.

Peter Downes who is the Outlook Economics director as well as the former senior Treasury forecaster stated that the budget seems quite good and also there is a chance of a small surplus this fiscal year. He also forecasted that if the commodity prices continue to maintain its upward position, mining profits remain high and the currency stays down, then a surplus budget could be expected for FY2019.

A recent commitment is made by the government to spend $9 billion in extra GST, for the states for a new medium-to-long term. Another $4.5 billion will be used for Catholic as well as Independent schools. Amount worth $3.6 billion will be used to present tax cuts for small and medium enterprise companies. The government has promised to insert an initial $3.9 billion as a future drought fund. This fund will be allocated from the Building Australia Fund.

As per the figures given by the Finance Department last month, this financial year the budget is $9 billion which is more contented in the first three months as compared to the May budget forecasts.

During the period of 12 months till 30 September, the revenue and expenditure were matching equally. However, it is expected that numbers should further improve given that the fiscal deficit in FY17 narrowed to $10.1 billion.


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