Fiscal outlook
The fiscal outlook for Australia remains very strong, with the Government forecasting its eighth budget surplus. Australia is in a much stronger fiscal position than most comparable economies.
The 2005‑06 Budget puts in place a series of major initiatives aimed at sustaining Australia’s economic performance, including income tax cuts and the abolition of the Tariff Concession Scheme. The budget also introduces welfare to work reforms which will boost participation in the workforce, increase the productive capacity of the economy and strengthen Australia’s fiscal position in preparation for the ageing of the population. The budget outlines arrangements for a Future Fund to make a provision for unfunded liabilities the nation faces, easing the cost of future demographic change.
An underlying cash surplus of $8.9 billion is expected in 2005‑06 compared with an estimated surplus of $4.5 billion at the Mid Year Economic and Fiscal Outlook 2004-05 (MYEFO). Underlying cash surpluses continue to be projected across the forward estimates.
Table 1: Budget aggregates
- Excludes expected Future Fund earnings from 2005‑06 onwards. For further explanation refer to Statement 2 Box 1 and Statement 8.
Expected Future Fund earnings are excluded from the underlying cash balance. This recognises that these resources are not available for recurrent spending, instead being pre-committed to fund existing liabilities. This represents a tightening of fiscal policy.
In accrual terms, a fiscal surplus of $7.4 billion is now expected for 2005‑06 compared to a surplus of $3.5 billion estimated at MYEFO.
Australia’s very strong fiscal position compared to OECD countries is highlighted in Chart 1. The fiscal position amongst OECD countries, on average, is expected to remain in deficit in 2005‑06 and 2006-07, notwithstanding strong global growth.
Chart 1: International comparison of budget balances
Source: OECD Economic Outlook 76 November 2004 and Budget Paper No. 1, Budget Strategy and Outlook 2005-06.