Australia: MYEFO revealed larger surpluses - TDS
Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, points out that Australia’s Mid-Year Economic and Fiscal Outlook (MYEFO) revealed larger surpluses via revenue upgrades and expenses falling short of May estimates.
“A stronger economy rather than prudent polices are behind the better outcomes.”
“The underlying cash balance is expected to improve from a 2018-19 deficit of -$A5.2b (-0.3% of GDP) to larger surplus of +$A4.1b (+0.2% of GDP) for 2019-20. Any estimate after that is irrelevant.”
“Ahead of a likely May 2019 election, both sides of politics plan to spend the revenue bonus, but still commit to surpluses. This is a risky strategy as revenue surprises rarely last. A "bracket creep" tax cut may be justifiable, but not a structural lift in spending commitments.”
“Australian fiscal metrics have vastly improved since the GFC, but there still aren't enough bullets in the chamber should a real crisis emerge (and an orderly decline in house prices is not a crisis).”