Statement 3: Fiscal Strategy and Outlook
The Government has set a pathway to return the budget to balance in 2015‑16 and to surplus by 2016‑17, improve the sustainability of Australia's public finances and build on Australia's record of fiscal and economic strength.
While Australia's economic fundamentals remain strong, tax receipts have been significantly affected by weaker than expected nominal GDP growth. The widespread effect of the persistently high Australian dollar on profits, combined with the impact of falling commodity prices, has resulted in lower than expected corporate profitability, and thus lower company tax receipts. A slower recovery in capital gains tax and lower than expected resource rent taxes have compounded the fall in company tax receipts over the forward estimates.
A more gradual return to surplus is appropriate given significant downgrades to revenue and the transition underway in the economy towards new sources of growth. Attempting to return to surplus too quickly by making drastic cuts in the near term would come at a significant cost to jobs and growth.
The Government continues to deliver on its commitment to the medium‑term fiscal strategy by choosing a sensible pace of consolidation, which strengthens Australia's public finances, on a timetable consistent with maintaining solid growth and low unemployment.
The Government has offset all new spending decisions since the 2009‑10 Budget. There is $43 billion in responsible savings in this Budget, building to a total of over $180 billion of savings in the six budgets since 2008‑09. Long‑term savings will continue to benefit the budget beyond the forward estimates.
The Government is continuing to build a stronger economy, a smarter nation and a fairer society through key productivity enhancing investment, such as the National Plan for School Improvement, DisabilityCare Australia, and critical infrastructure. These investments are fully and sustainably funded over the medium term.
This Budget provides a clear plan for moving the underlying cash balance from a deficit of $18.0 billion (1.1 per cent of GDP) in 2013‑14, into balance in 2015‑16 and a surplus of $6.6 billion (0.4 per cent of GDP) in 2016‑17. All spending decisions across the forward estimates are fully offset by savings. Policy decisions made in this Budget will deliver the largest improvement to the forward estimates position in nearly two decades.
Australia's financial position remains amongst the strongest in the developed world. Net debt is expected to peak in 2014‑15 and come down after that. Australia's net debt as a share of GDP is expected to peak at less than one‑eighth of the level in the major advanced economies.
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