Part 1: Overview
The economic and fiscal outlook for Australia remains sound. The Australian economy is expected to grow modestly in 2006-07, despite the severe drought adversely affecting the farm sector and related industries. Strong fiscal outcomes are forecast and projected across the forward estimates.
An underlying cash surplus of $11.8 billion is forecast for 2006-07, marginally stronger than the 2006-07 Budget forecast.
Estimated taxation receipts in 2006-07 are broadly unchanged from the 2006-07 Budget. A lower than expected receipts outcome in 2005-06, lower realised capital gains from investors and the effects of lower oil prices and higher deductible costs on petroleum resource rent tax have, together, broadly offset the effects of stronger employment growth and higher expected company profits.
Cash payments in 2006-07 are estimated to fall, largely reflecting slippage in some defence acquisition projects and lower payments across a range of income support programmes. These reductions are partially offset by policy measures announced since the Budget, including drought relief to support affected regions, new and expanded drug listings on the Pharmaceutical Benefits Scheme and payments to healthcare providers to ensure veterans continue to access free health care.
Table 1 presents the fiscal and underlying cash balances for 2006-07 and the forward years.
Table 1: Summary of budget aggregates
- Excludes expected Future Fund earnings.
The underlying cash surpluses projected for the future years emphasise Australia's sound fiscal outlook at a time when many of the major advanced economies are continuing to experience significant deficits.
Chart 1: International comparison of budget balances 2007 and 2008(a)
- International data are for the total general government sector, sourced from OECD Economic Outlook 80, November 2006. Australian data is for the Australian Government general government sector.
In accrual terms, the fiscal balance is expected to record a $10.4 billion surplus in 2006-07, higher than forecast at the 2006-07 Budget.
Further details on the accrual and cash budget estimates are provided in Part 3.