Statement 1: Fiscal Strategy and Budget Priorities
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The 2003-04 Budget continues the Government's very strong economic management. The Budget delivers personal income tax cuts of $10.7 billion over the next four years. The Budget provides substantial additional funding to strengthen defence capabilities and again upgrade domestic security. In addition, it includes measures to improve affordability of medical services and delivers a very substantial reform of Australia's higher education system. Notwithstanding the weak international economic conditions, the Australian economy is forecast to grow by 3¼ per cent in 2003-04, again outperforming the United States, Japan and the European Union. After delivering tax cuts of $2.4 billion in 2003-04, the Budget is still forecast to be in surplus with an underlying cash balance of $2.2 billion. |
Fiscal outlook
The fiscal outlook for Australia remains very sound. Since turning around the large budget deficit in 1996-97, this Budget delivers the sixth surplus of the Coalition Government.
The budget estimates presented in Table 1 show that, after the delivery of tax cuts of $2.4 billion, an underlying cash surplus of $2.2 billion is now expected in 2003-04 compared with an estimated surplus of $4.9 billion at the 2002-03 Mid-Year Economic and Fiscal Outlook (MYEFO). Underlying cash surpluses continue to be projected across the forward estimates.
Table 1: Budget aggregates
After the delivery of tax cuts of $2.4 billion, a fiscal surplus of $0.7 billion is now expected for 2003-04 compared to the fiscal surplus of $3.4 billion estimated at MYEFO.
For 2002-03 an underlying cash surplus of $3.9 billion is expected compared to the estimate of $2.1 billion at MYEFO. This improvement is being driven by higher company and indirect tax collections and lower expenses. A fiscal surplus of $1.5 billion is expected for 2002-03, compared to a deficit of $0.5 billion estimated at MYEFO.
Australia is again forecast to have a much stronger fiscal position than most comparable developed economies. The latest OECD projections show that most of the major advanced economies are expected to record deficits in 2003 and 2004. The United States is expected to record a deficit of 4.2 per cent of GDP in 2004, while the average deficit for the OECD as a whole is expected to be 3.5 per cent of GDP (Chart 1). Additionally, Australia continues to have one of the lowest levels of net government debt in the OECD.
Chart 1: International comparison of budget balances 2003 and 2004(a)
- International data are for the total general government sector, sourced from OECD Economic Outlook (73) (preliminary edition, April 2003). Australian data is for the Commonwealth general government sector.