The 2010‑11 Mid‑Year Economic and Fiscal Outlook (MYEFO) released today forecasts strong growth, falling unemployment, and the fastest positive turnaround in the budget in more than 40 years.
The MYEFO forecasts the Australian economy to grow by 3¼ per cent in 2010‑11 and 3¾ per cent in 2011‑12 and the unemployment rate is expected to fall to 4½ per cent by the June quarter of 2012.
The fiscal stimulus which kept Australia out of recession is being withdrawn as a self‑sustaining private‑sector recovery takes hold, supported by high commodity export prices and a strong pipeline of business investment projects.
This mid‑year update confirms that our Budget is in fantastic shape with the fastest positive turnaround in the budget on record and public finances the envy of the developed world.
Despite the global uncertainty and the impact of a higher Australian dollar on revenues, the update shows the budget remains on track to return to surplus in 2012‑13 – well before any major advanced economy.
This result would not be possible without the strict fiscal rules that we have set for ourselves, that included the unprecedented step of offsetting an entire election campaign with savings measures.
The Government has a strong record of responsible economic management, with today's saving measures coming on top of the $83.6 billion booked in our first three budgets alone.
The forecast underlying cash deficit for 2010‑11 is $41.5 billion (3.0 per cent of GDP), returning to a surplus of $3.1 billion (0.2 per cent of GDP) in 2012‑13. This represents a fiscal consolidation of 4½ per cent of GDP over the three years to 2012‑13.
Net debt is expected to peak at 6.4 per cent of GDP in 2011‑12. This will leave Australia in a substantially stronger fiscal position than any of the major advanced economies.
Net debt in the major advanced economies is expected to reach an average 90 per cent of GDP in 2015, 14 times higher than the expected peak in Australia's net debt. In 2012‑13, when the Australian budget is expected to return to surplus, the major advanced economies are forecast to still be in deficit by an average of 6 per cent of GDP.
The Government has continued to deliver on its fiscal strategy, with annual real spending growth held to less than 2 per cent and the Government has offset all new spending decisions since the Pre‑election Economic and Fiscal Outlook.
The MYEFO also begins the task of delivering on the Government's election commitments, with important initiatives in mental health, schools, trades training, infrastructure, and climate change.
This update shows Australia's economy and budget in a far superior position to just about any major advanced economy, many of whom are still grappling with stubbornly high rates of unemployment, sluggish private demand, and high sovereign debt levels.
The MYEFO is available at www.budget.gov.au.
9 November 2010