Treasurer Scott Morrison will produce a budget surplus one year earlier than previously predicted.The buoyant business conditions that have provided Scott Morrison with a tax revenue windfall for Tuesday’s budget look like lasting a while yet.
As media reports speculated the treasurer will produce a budget surplus one year earlier than previously predicted, the National Bank’s monthly survey shows business conditions are at their strongest in over 20 years, while confidence also rose in April to stand well above its historical average.
“The strength in business conditions and leading indicators suggest economic growth will strengthen and that over time we should see strong jobs growth and falls in the unemployment rate,” NAB chief economist Alan Oster said releasing the report on Monday.
This should eventually translate into upward pressure on wages.
However, the ANZ job advertising series, a key pointer to future employment, fell for a third consecutive month in April at a time when jobs growth has already come off the boil.
One industry that has raised concerns for Mr Oster in the NAB report is retailing, where conditions have turned negative for the first time this year.
Retailers will be hoping Mr Morrison’s promised personal income tax cuts will turn around their fortunes.
However, the treasurer has already conceded they won’t be “mammoth”.
The n newspaper reported tax relief would come through increasing the low-income tax offset while the budget would promise tax cuts for higher income brackets by 2024.
At present workers with a taxable income less than $66,667 get this offset.
The maximum tax offset of $445 applies to incomes of $37,000 or less and this amount is reduced by 1.5 cents for each dollar over $37,000.
Finance Minister Mathias Cormann has also defended the coalition’s decision to lock in a cap on the amount of tax revenue collected by the government.
The 23.9 per cent tax-to-gross domestic product limit will be written into the rules for the budget.
But Labor’s finance spokesman Jim Chalmers said n’s “couldn’t care less” about the treasurer’s latest tax thought bubble.
“It’s a political accounting trick,” he told reporters in Canberra.
“What the government seems to be proposing to do is to give tax cuts on the back of a temporary spike in revenue, as well as some likely very optimistic projections about wages and other things in the budget to give permanent tax cuts off the back of that.”
Sky News reported the government will announce a surplus of around $5 billion in 2019/20 – a year earlier than previously forecast.
If correct, it would be the first surplus since before the 2008-2009 global financial crisis.
JP Morgan economists said it will be the first time in many years the budget will support economic growth.
Sticking to the long-standing surplus commitment for 2020/21, they calculate fiscal policy may add 0.1 percentage point to growth this year and 0.2 percentage points in the next.
“This is a significant swing from the 0.3 percentage point average drag imparted over the past few years,” they say in their pre-budget analysis.