Part 1: Overview
The economic and fiscal outlook for Australia remains sound and has strengthened since Budget. The Australian economy is expected to grow strongly in 2007‑08, notwithstanding increased downside risks to the world economic outlook. Strong fiscal outcomes are forecast and projected across the forward estimates.
In light of this strong economic and fiscal outlook, the Government will provide personal income tax cuts of $34 billion over the forward estimates period, commencing from 1 July 2008.
An underlying cash surplus of $14.8 billion is forecast for 2007‑08, $4.2 billion higher than the 2007‑08 Budget forecast.
Estimated taxation receipts in 2007‑08 have been revised up by $5.0 billion since the 2007‑08 Budget. The higher taxation estimates are driven by stronger forecast growth in employment, higher wages, profits and realised capital gains.
Cash payments in 2007‑08 are estimated to be $1.6 billion higher than the estimate at the 2007‑08 Budget. This largely reflects new policy measures announced since Budget, including drought relief to support affected regions, the Northern Territory Emergency Response to assist remote communities and the new Disability Assistance Package to address unmet need in the provision of disability services. These increases are partially offset by lower than expected payments across a range of income support and welfare programmes and slippage in some defence acquisition projects.
Table 1 presents the fiscal and underlying cash balances for 2007‑08 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)
- Source: International data is for the total general government sector, sourced from the latest OECD Economic Outlook, No. 81, May 2007, which contains data up to 2008. Australian data is for the Australian Government general government sector.
In accrual terms, the fiscal balance is expected to record a $14.9 billion surplus in 2007‑08, $4.9 billion higher than forecast at the 2007‑08 Budget.
Further details on the accrual and cash budget estimates are provided in Part 4.