Statement 3:
Fiscal Strategy and Outlook
(Continued)
Overview of fiscal position
The 2010‑11 Budget shows a significantly improved fiscal outlook. The budget is now expected to return to surplus in 2012‑13, three years earlier than previously projected.
The Government has delivered this early return to surplus by maintaining a strong commitment to its fiscal strategy. Consistent with this strategy:
- real growth in spending has been kept below 2 per cent in years of above‑trend economic growth;
- all spending measures have been offset over the forward estimates by a reprioritisation of other policies; and
- the additional tax receipts associated with a strengthening economy have been allowed to flow through to improve the budget position.
These actions have improved the projected budget position in each year of the forward estimates since the Mid‑Year Economic and Fiscal Outlook 2009‑10 (MYEFO). These improvements have been achieved despite tax receipts in the period to 2012‑13 remaining around $110 billion lower than had been expected at the time of the 2008‑09 Budget. In 2010‑11, the underlying cash deficit is now expected to be $40.8 billion (or 2.9 per cent of GDP) compared with $46.6 billion (or 3.5 per cent of GDP) at MYEFO.
Australia's budget position continues to be among the strongest in the developed world. Australia's forecast deficit of 2.9 per cent of GDP in 2010‑11 is well below the 9.5 per cent average for the major advanced economies in 2010. A return to surplus in 2012‑13 would place Australia at the forefront of global fiscal consolidation efforts, with the major advanced economies expected to remain in collective deficit by an average of 6.0 per cent of GDP in 2012.
Improvements to the expected budget position mean that net debt is now expected to peak at 6.1 per cent of GDP. This peak is at a level less than a tenth of the average of the major advanced economies of 82.4 per cent of GDP in 2011. It is projected that net debt will be eliminated three years earlier than projected at MYEFO.
Table 1: Budget aggregates
- Excludes expected Future Fund earnings.
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