- Revenue collection is running way ahead of federal budget forecasts.
- This means that the budget deficit hole is now likely to be filled earlier than thought, probably next financial year.
- Deloitte Access Economics forecasts a modest underlying cash deficit of $4.9 billion in 2018-19, the smallest since the GFC.
Revenue is flowing to federal government coffers, filling the budget deficit hole faster than forecast, as an improving economy returns tax dollars to Canberra.
Deloitte Access Economics says it’s so good that there is an outside chance the budget deficit could disappear this financial year.
In its quarterly Budget Monitor, Deloitte forecasts a modest underlying cash deficit of $4.9 billion in 2018-19, the smallest since the GFC, followed by a small surplus of $4.2 billion in 2019-20.
The projection for this financial year is $9.5 billion better than the budget deficit forecast of $14.46 billion.
“The shift back into the black remains elusive for 2018-19,” Deloitte says in its quarterly Budget Monitor.
“It has taken the current virtuous cycle of surging revenues and some modest spending restraint to get us this close. But we really are close.”
But there is a chance the Budget may squeak into surplus in 2018-19.
“On our forecasts it will fall short on the underlying cash measure, but be in surplus on the fiscal balance,” the Budget Monitor report says.
“Yet it wouldn’t fall short by all that much on cash. And although it would be a stretch, there’d be a few options open to get across the line — such as help from a larger Reserve Bank dividend — if the politics were sufficiently compelling.”
Deloitte says the key risk is that politicians will promise a lot in the lead up to the federal election, due in May.
“A look at history is a reminder the most common Budget mistake is to take an improving budget trend and then immediately re-package it as permanent promises for the punters,” says the Budget Monitor report.
The Budget Monitor forecasts the economy to be $27 billion bigger this year than official projections.
Current revenue growth is up more than 10% above a year ago, pumped up by surge in profits.
That’s generating a matching surge to a budget surplus.
Company tax will raise almost $100 billion this year, more than half as much again as it raised in the year to March 2016, and up by $8.4 billion on the Budget forecast.
The superannuation tax take is up by $1 billion on Treasury forecasts.
Deloitte Access Economics says GST collections may disappoint amid consumer caution as house prices slide.
The bottom line is 2018-19 revenues is forecast to be $9.2 billion above where Treasury estimated them.
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