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.