Monthly Financial Statements
- Budget: The Federal Budget is effectively balanced. In the twelve months to April 2019, the Budget deficit stood at $33 million (less than 0.1 per cent of GDP).
- Other surplus measures: Over the same 12-month period to April, the fiscal balance was in surplus by $4,846 million (0.2 per cent of GDP). The net operating balance was in surplus by $8,932 million (0.4 per cent of GDP).
The monthly Budget figures can provide insights on the broader economy and policy settings. If fiscal settings are tight, the Reserve Bank may allow easier monetary settings.
What does it all mean?
- The underlying Budget is broadly balanced. The deficit for the full 12 month period to April (rolling annual total) was $33 million, less than 0.1 per cent of GDP. The Budget had been in surplus in the 12 months to March by $1,544 million but the figures do bounce around from month-to-month.
- The Government continues to show restraint on spending with payments in the 10 months to April around $2.3 billion less than assumed by the finance boffins. Revenues were $363 million lower than where the Department of Finance thought they would be, reflecting a slowing economy.
- To further highlight the slowdown of the economy (and need for government stimulus), annual growth of GST receipts fell to a 43-month low of 0.9 per cent, slower than inflation. Businesses and consumers are still spending, but at a far slower rate than late last year.
- The Federal Opposition must respect the election result. The electorate supported the Government’s tax proposals over that of the Opposition’s rival proposals. The community must be allowed to plan with certainty.
What do the figures show?
- In the twelve months to April 2019, the Budget deficit stood at $33 million. Over the same 12-month period to April, the fiscal balance was in surplus by $4,846 million with the net operating balance in surplus by $8,932 million.
- Smoothed revenues (twelve months to April) were up 9.6 per cent on a year ago – down from 9.9 per cent in March (which was the fastest growth in 6½ years). Expenses rose by 3.87 per cent over the same period, the fastest rate in 17 months.
- Annual company tax collections are up 13.1 per cent over the year with net individual tax up 9.2 per cent. In expenses, Health spending is up just 2.2 per cent while public debt interest is up 1.8 per cent, the slowest growth in three years.
- The Department of Finance noted: “The net operating balance for the year to 30 April 2019 was a surplus of $4,368 million, which is $2,099 million higher than the 2018-19 Revised Budget profile surplus of $2,270 million. The difference results from higher than expected revenue and lower expenses.”
- In terms of the underlying cash balance, “The underlying cash balance for the financial year to 30 April 2019 was a deficit of $4,914 million, which is $1,866 million lower than the 2018-19 Revised Budget profile deficit of $6,780 million.”
- Receipts: “Total receipts were $363 million lower than the 2018/19 Revised Budget profile.”
- Payments: “Total payments were $2,258 lower than the 2018/19 Revised Budget profile.”
- In terms of the fiscal balance the Department of Finance noted: “The fiscal balance for the year to 30 April 2019 was a surplus of $1,816 million, which is $3,498 million better than the 2018-19 Revised Budget profile deficit of $1,682 million. The difference results from higher than expected revenue, lower expenses and lower net capital investments.”
- Federal Treasury and the Department of Finance currently expect an underlying deficit of $4,162 million for 2018/19, well above the current result for the 12 months to April.
- Receipts from the Goods and Services Tax stood at $66,463 million in the twelve months to April, up 0.9 per cent on a year ago and down from the record $67.57 billion in receipts for the year to December.
- Actual GST receipts for the 10 months to April stood at $56,836 million, just below the Revised Budget ‘profile’ of $57,466 million.
What is the importance of the economic data?
- The Department of Finance releases the Government Financial Statements (Niemeyer Statement) almost every month. The statement allows investors to track the current Budget position and provides insights into the effectiveness of fiscal policy.
What are the implications for interest rates and investors?
- The turnaround in the Budget position has been nothing short of remarkable. Just a year ago the rolling annual deficit was over $12 billion. At its peak, the budget was in deficit by almost $60 billion. Today the budget accounts are balanced.
· But it should be noted that the economy has slowed in line with most major economies. Fiscal policy must adapt to the times, and at present, modest fiscal stimulus is required. That means a small deficit is more appropriate than a blinkered approach of keeping the budget in balance or pushing it further into surplus.
· To complement tax offsets flowing through to taxpayers, we expect the Reserve Bank to cut rates on Tuesday week.