3 May 2016
Australia’s 2016/17 deficit to be projected around –A$33.7bn - Westpac
Sean Callow, Research Analyst at Westpac, notes that at 7:30pm Sydney/5:30pm Sing/HK we will see the details of Australia’s 2016/17 federal budget.
Key Quotes
“As always, many policy changes have been provided to the media. These include higher tobacco taxes, small income tax bracket adjustments, modest tax cuts for SMEs, an attempt to make multinationals pay more tax, smaller tax breaks on superannuation contributions of higher income earners and spending on high profile transport projects.
In terms of the fiscal profile, the government should enjoy a rare improvement in economic parameters since the last update in December. The surge in iron ore and other commodity prices means Australia’s terms of trade are finally improving, helping projections of corporate tax revenue. Real GDP growth has also surprised on the strong side since Dec though low inflation and wages could offset this in terms of nominal revenues.
Westpac expects the 2016/17 deficit to be projected around –A$33.7bn, -2.0%/GDP, in from –A$37.4bn in 2015/16 (2.3%/GDP), with deficits narrowing to -0.4%/GDP by 2019/20. Net debt should be around 18%/GDP in 2016/17. While this is a huge event locally, AUD traditionally does not respond noticeably to the budget forecasts. There will probably be more FX interest in the response from ratings agencies, which usually release brief statements within an hour or two of the budget details.”
Key Quotes
“As always, many policy changes have been provided to the media. These include higher tobacco taxes, small income tax bracket adjustments, modest tax cuts for SMEs, an attempt to make multinationals pay more tax, smaller tax breaks on superannuation contributions of higher income earners and spending on high profile transport projects.
In terms of the fiscal profile, the government should enjoy a rare improvement in economic parameters since the last update in December. The surge in iron ore and other commodity prices means Australia’s terms of trade are finally improving, helping projections of corporate tax revenue. Real GDP growth has also surprised on the strong side since Dec though low inflation and wages could offset this in terms of nominal revenues.
Westpac expects the 2016/17 deficit to be projected around –A$33.7bn, -2.0%/GDP, in from –A$37.4bn in 2015/16 (2.3%/GDP), with deficits narrowing to -0.4%/GDP by 2019/20. Net debt should be around 18%/GDP in 2016/17. While this is a huge event locally, AUD traditionally does not respond noticeably to the budget forecasts. There will probably be more FX interest in the response from ratings agencies, which usually release brief statements within an hour or two of the budget details.”