Coalition abandons key part of its budget strategy | swrighteconomy erykbagshaw
Wages, employment and economic growth were all downgraded in Monday's mid-year economic and fiscal outlook. Trade tensions, drought and low productivity forced Mr Frydenberg and Finance Minister Mathias Cormann to write down overall revenues by $33 billion over the next four years.This year's expected surplus, which would be the first in 11 years, has been downgraded from $7.1 billion to $5 billion.
Since coming to office, the government's fiscal policy has included a promise to deliver surpluses of at least 1 per cent of GDP "as soon as possible". It is now pledging to build "sustainable" surpluses of 1 per cent of GDP "when economic circumstances permit to build resilience and support fiscal flexibility".
The forecast surplus for 2022-23, when the second stage of the government's tax cuts takes effect, is now just $4 billion. The combined cost of tax cuts promised in the past two budgets will jump from $8.3 billion to $22.1 billion in that year. AMP Capital chief economist Shane Oliver said the cut in the expected surplus in 2022-23 was due largely to softer assumptions around economic growth and the budget's revenue base.
He said iron ore would have to remain well above the assumed price of $US55 a tonne for the government to afford the second stage of its tax-cut plan.
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