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Surplus before spending. Frydenberg’s risky MYEFO strategy

Stephen Bartos writes in The Conversation (16.12.19) about the federal government's MYEFO economic update, suggesting that treasurer Josh Frydenberg has pulled out all stops to continue to forecast budget surpluses, but they are low and don't take account of several likely costs to government finances.

'Today’s mid-year economic and fiscal outlook (MYEFO) continues to promise a small budget surplus in 2019-20 and each of the following three years.

'But the surpluses are very small, roughly half the size of those promised at the time of the April budget, and highly uncertain.

'The forecasts for economic growth and wages growth have been adjusted down, but are still optimistic, subject to downside risks, especially if international economic conditions deteriorate.

'The lower wage growth forecast is an acknowledgement of the new reality that wage growth is not climbing and remains low.

'… There are thus numerous uncertainties around MYEFO – among them the growth path of the Chinese economy and its impact on iron ore prices, consumer demand, wages, spending pressures.

'The projections might be achieved if all goes well – but there are considerable risks all will not.'

 

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