Money Comment: Australia's economy will come back to 'haunt' Scott Morrison's optimistic budget projections

08:06  10 may  2018
08:06  10 may  2018 Source:   businessinsider.com.au

Comment: The question Scott Morrison will not answer

  Comment: The question Scott Morrison will not answer There is one big question Scott Morrison does not want to answer about the tax cuts he will reveal on Tuesday night. Will the government honour its rule of allowing any improvements in tax revenue to be “banked” on the budget bottom line?This is the rule imposed after the global financial crisis to guard against political decisions that spend any revenue gains that are otherwise needed to produce a surplus. The question goes to the heart of the debate on whether the country can afford the new income tax cuts.

Australia ’ s budget position is the best it’ s been in the post-GFC era, helped by stronger commodity prices and employment growth over the past year. Capital Economics warns the economy will return to “ haunt ” Scott Morrison by not replicating the strength seen in the past year.

Australia ’ s budget position is the best it’ s been in the post-GFC era, helped by stronger commodity prices and employment growth over the past year. Capital Economics warns the economy will return to “ haunt ” Scott Morrison by not replicating the strength seen in the past year.

a person wearing a mask© Provided by Business Insider Inc

Australia's budget position is currently the best it's been since before the global financial crisis, helped by stronger commodity prices and employment growth over the past year.

It has allowed treasurer Scott Morrison to cut income taxes and project a return to a budget surplus one year ahead of schedule, an outcome that few would have expected just 12 months ago.

However, as any forecaster knows, it's always dangerous to extrapolate near-term movements over a longer time horizon.

To Paul Dales and Kate Hickie, economists at Capital Economics, that's exactly what the government has done, warning that even if the Coalition wins next year’s election, Morrison may not be able to fulfill his election promises.

Comment: Debt is not the risk; it’s the economy, stupid

  Comment: Debt is not the risk; it’s the economy, stupid The real measure of the budget's worth will not be in how the Coalition deals with what has been a passive windfall but in how it chooses to spend our money. After all, the government’s decision (like that of its predecessors) not to index tax rates to inflation means that as much as $52 billion would come to the Treasury in the next four years simply because of bracket creep – inflation pushing a bigger proportion of wages into higher tax calibrations.

The economic projections released by the treasurer, Scott Morrison , on Tuesday night would see the budget return to balance in 2019-20, one year ahead of schedule, and a expanded. unthreaded. Loading comments … Scott Morrison seeks backing for budget tax cuts without full costings.

Comments & replies. With the economy finally turning a corner, Morrison used a speech delivered in late April to confirm the 2018 budget would benefit from stronger than expected revenue collections. Scott Morrison seeks backing for budget tax cuts without full costings.

"We suspect the economy will return to haunt him by not being as obliging in future years," they said following the budget's release.

In particular, Dales and Hickie say the government's revised budget projection -- forecasting smaller near-term deficits and larger long-term surpluses -- was only possible due to good news on the economy over the past year and some strong hopes for the performance of the economy over the next few years.

On for young and old: Last-minute details show this is really shaping up as an election budget

  On for young and old: Last-minute details show this is really shaping up as an election budget The Coalition will move to re-energise support among baby boomer voters in tonight's budget with a multi-billion dollar package aimed at improving retirement lifestyles and people's ability to continue working late in life.  Younger voters will also get some sweeteners with some measures that will make it easier to consolidate retirement savings accounts. They'll also see the benefits of the tax cuts being extended to low and middle-income earners, which ABC reports will be worth around $40 a month for those qualifying for the greatest amount of tax relief.

Scott Morrison seeks backing for budget tax cuts without full costings. One of the most interesting things is Scott Morrison ' s admission that middle income earners are likely to spend extra money that comes their way, which boosts the economy .

The budget is out and Treasurer Scott Morrison has started the job of selling it. Look back on the budget announcement as it was unveiled. Morrison woos voters with modest tax cuts and the promise of more to come . ABC funding frozen in million hit to bottom line.

"The real trick in the budget was that the Treasurer managed to provide a net giveaway while projecting smaller budget deficits and larger budget surpluses," they said.

"This is all only possible due to the good news on the economy over the past year and some strong hopes for the performance of the economy over the next few years.

Keep this chart in mind when listening to Australia's budget tonight

  Keep this chart in mind when listening to Australia's budget tonight Treasurer Scott Morrison will hand down Australia's federal budget later today. When he steps up to the Despatch Box at 7.30pm AEST, keep the chart below in mind. © CoreLogic, Twitter Australia's population profile by age. Posted on Twitter today by Cameron Kusher, Research Analyst at CoreLogic, it simply shows Australia's population profile by age.He's marked Australia's current retirement age -- 65 -- with a red line.

Scott Morrison introduces his income tax legislation – the centrepiece of his budget – to parliament. • ‘Black’ economy is under the spotlight with government planning to claw back revenue it is losing to Morrison ’ s plan will flatten Australia ’ s progressive income tax scales dramatically.

Scott Morrison ’ s optimistic Budget relies on seven years of plenty. Budget 2018: Australia reacts. Did you make the Treasurer’ s gift list? Tax cuts: What you’ll get. Tax will continue to be the centre of Parliament’ s debate for months to come .

"Indeed, such tweaks meant that over the next few years an extra $35 billion is expected to flow into the Treasury’s coffers."

a screenshot of a cell phone© Provided by Business Insider Inc

Dales and Hickie say the combination of tax relief and stronger fiscal forecasts were only possible due to upward revisions to many of the government's economic assumptions.

"Relative to the projections in December’s MYEFO, new policy decisions have worsened the underlying budget balance by a cumulative $14.9 billion over the five years from 2017/18 to 2021/22," they said.

"Instead, all of the improvement came from a $35.1 billion windfall due to more favourable economic parameters."

While the government made small upward revisions to its forecasts for real GDP and consumption growth, Dales and Hickie say the most significant revision was made to its forecasts for employment growth in the current financial year, driven by stronger-than-expected jobs growth that delivered unexpected income tax revenues as a consequence.

Comment: Budget 2018: Biggest challenge for Malcolm Turnbull was nailing the pitch in two-thirds the time

  Comment: Budget 2018: Biggest challenge for Malcolm Turnbull was nailing the pitch in two-thirds the time Comment: Budget 2018: Biggest challenge for Malcolm Turnbull was nailing the pitch in two-thirds the timeOne of the biggest challenges for Malcolm Turnbull's Government has been that it's had to nail its economic pitch in two-thirds the time.

Scott Morrison with Australian Financial Review editor-in-chief, Michael Stutchbury, on Tuesday. But in the world of budgets , where even the best medium-term economic projections are inevitably It is obvious what the prudent policy response would be. Which comes back to the original point.

S &P panned this projection as being way too optimistic in respect of its wages growth and Over the most recent four months to February 2018, Treasurer Scott Morrison has delivered a budget The Department of Finance comments that this surprisingly strong outperformance was driven by .5

"Most importantly, following the exceptionally strong rates of jobs growth throughout 2017, the Treasurer revised up his forecast for employment growth in 2017/18 from 1.75% to 2.75%," they said.

"This has led to a significant upward revision in forecasts for income tax receipts of $13 billion over four years."

Despite a less-than-stellar track record for predicting wage growth in the post-GFC era, the government also retained its rosy forecasts for wage pressures, looking for Australia's wage price index to accelerate to 3.25% from 2.1% at present over the next two years despite an expectation that unemployment will remain entrenched above 5%.

"The Treasurer expects annual growth in the wage price index to average 2.75% in 2018/19 and pick-up to 3.25% by 2019/20, while the unemployment rate is expected to fall to 5.25% by 2018/18 and stay there," they said.

Dales and Hickie say the process of extrapolating near-term economic performance over the longer term means the risks to the budget forecasts are slanted to the downside.

"We’re not convinced the economy will live up to the Treasurer’s expectations as wage growth will probably remain low and the housing market will probably weaken further," they said.

"If so, then the budget won’t return to surplus as soon as expected and net debt will remain higher for longer.

"That means whoever is Treasurer after next year’s election will have to acknowledge that the fiscal outlook is not as rosy as Morrison has suggested."

Question Time: Scott Morrison blasts 'muppets' after budget .
Treasurer Scott Morrison has blasted the Opposition as “muppets” during a heated exchange in the first Question Time since he delivered the 2018 budget. Morrison was repeatedly pressed by Labor about the total cost of corporate tax cuts over ten years, and if the figure exceeded $100 billion.At one stage Speaker Tony Smith asked Liberal MP Paul Fletcher to stop interjecting, and Tanya Plibersek had to start her question to Morrison again.The debate reached a crescendo when the Treasurer addressed the opposition as “you muppets”.The comment was ruled unparliamentary.

—   Share news in the SOC. Networks
This is interesting!