Australia unveils tax cuts as it forecasts early return to surplus
Marked improvement in finances will likely be positive news for PM after a series of setbacks
Australia’s centre-right government confirmed expectations in its annual budget yesterday that it would return the country’s finances to a small surplus in 2019-20, a year earlier than planned and after almost a decade of deficits.
The ruling Liberal-National coalition also unveiled some big spending measures, including a package of personal income tax cuts for low and middle income earners, as a revenue windfall from company taxes enabled a shift away from its previous “debt and deficit disaster” rhetoric.
“We are no longer borrowing to pay for everyday expenses,” Treasurer Scott Morrison told reporters. “We have reached a turning point for debt.”
Morrison predicted a budget surplus of A$2.2 billion (Dh6.07 billion) in 2019-20, a remarkable turnaround on the A$2.6 billion deficit forecast in the government’s midyear review in December. The projected surpluses increase to A$11 billion in 201920 and A$16.6 billion in 2020-21.
Net debt is seen peaking at 18.6 per cent of Australia’s A$1.8 trillion ($1.4 trillion) gross domestic product (GDP) in 2017-18, also a year earlier than forecast, before falling to 3.8 per cent by 2028-29.
The marked improvement in the finances will likely be positive news for Prime Minister Malcolm Turnbull after a series of political setbacks, given the budget is widely viewed as the unofficial campaign kick-off for federal elections due in the first half of 2019.
The early return to surplus will also likely be welcomed by ratings agencies who have retained Australia’s sovereign rating at a top-notch triple-A.
Still, Standard & Poor’s put Australia on a “negative watch” in mid-2016, citing deteriorating government finances, and some economists have warned that more spending before a federal election could put the pristine rating at risk.