Mathias Cormann confirms economic acceleration as tax revenue grows

Mon, 03 Mar 2014  |  

The Australia economy is significantly stronger than was forecast at the time of the release of the Mid-Year Economic and Fiscal Outlook in late December.

So says Finance Minister Mathias Cormann.

The Government Monthly Financial Statement for the six months to December, shows that tax revenue is flowing in to the government coffers at a 1.1 per cent faster pace ($1.754 billion in six months) than was forecast at MYEFO.

Encouragingly, the increase is quite broadly based.

Income tax receipts are running 0.7 per cent higher than assumed at MYEFO. This suggests the ABS employment and wages data may be overstating the softness of labour market conditions because income tax is a function of the number of people in paid employment and the wages they are paid. Strong jobs growth and higher wages equals more income tax collections for the government and vice versa.

Consistent with the solid corporate reporting season, company tax receipts are running a hefty 3.3 per cent above the rate assumed at MYEFO. This is a good sign of the underlying strength in corporate Australia.

GST receipts are running 0.4 per cent below the MYEFO forecast but excise and customs duty are both a touch stronger. Perhaps the Treasury forecasts for household consumption growth were close to the mark as these up and downs cancel each other out.

There are a few other bits and bobs on the government revenue side presented by Mr Cormann that are tracking a bit higher or lower than forecast in MYEFO, but they are small beer. In the end, if either employment or wages are stronger than forecast in MYEFO, with a solid lift in company tax payments while GST revenues and other duties are more or less on track, it signals the economy chugging along at a more rapid pace than assumed in the MYEFO.

In other words, the economy is doing well and the efforts of Treasurer Hockey to brow beat Treasury into producing overly pessimistic forecasts in MYEFO is already yielding political gains for the government.

Even without a brass razoo impact on the budget from a change in policy or cuts in government spending, the fact the economy is tracking more favourably than assumed in MYEFO means that the deficit in 2013-14 and beyond will be smaller than assumed.

This will be the foundation for the Coalition's 2016 election strategy – fixing the budget even though most people know there was nothing wrong with it to start with.


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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link:   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced. 

What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.