The Mid-Year Economic and Fiscal Outlook (MYEFO) confirms the resilience of the Australian economy and that the Budget is on track to return to surplus for the first time in 12 years.
Despite significant revenue write-downs on the back of sustained global and domestic economic headwinds, surpluses of $5 billion this financial year and cumulative surpluses of $23.5 billion over the forward estimates are expected to be delivered.
Budget surpluses are expected to continue to build to over 1 per cent of GDP in the medium term.
Spending growth remains under control, with just 1.3 per cent average annual real growth in spending over the forward estimates period and payments as a share of GDP at 24.5 percent in 2019-20 falling to 24.4 percent by 2022-23, below the 30-year average.
As part of our responsible and considered economic plan our tax-to-GDP ratio remains below our cap of 23.9 per cent.
The outlook for the Australian economy is positive. GDP growth in the first three quarters of 2019 has been stronger than it was in the second half of 2018 with MYEFO confirming that the economy is forecast to grow by 2¼ per cent in 2019-20. Growth is forecast to improve to 2¾ per cent in 2020-21, which is faster than any G7 nation and well above the OECD average of 1.6 per cent.
As the IMF and the OECD have done, we have downgraded global growth in 2019 and 2020 as economies the world over experience the challenges from global trade tensions.
The labour market remains strong with more than 1.4 million jobs created since we came to Government. Jobs growth of 2.0 per cent through the year is stronger than any G7 economy and more than double the OECD average of 0.9 per cent and almost three times the 0.7 per cent growth Australia was experiencing when we came to office.
The strong labour market has seen welfare dependency drop to its lowest level in 30 years, which is helping to keep real growth in spending to the lowest of any Government in 50 years.
As part of our responsible fiscal management, we continue to make prudent assumptions for commodity prices - the iron ore price is assumed to decline to US$55 per tonne by the end of the June quarter 2020, while metallurgical coal prices are assumed to remain at US$134 per tonne and thermal coal prices are assumed to remain at US$64 per tonne.
The Government's management of Australia's finances has ensured we have the capacity to deal with domestic and international challenges including the devastating drought and global trade tensions. The Government is continuing to invest record funding in the essential services Australians rely on, while at the same time delivering tax relief and restoring the nation's finances to pay down debt.
A stronger and more productive economy
The Government is accelerating and creating new road and rail projects to tackle congestion and to get people home sooner and safer.
The total transport infrastructure investment will be over $100 billion over 10 years, including an additional $4.2 billion over the next four years.
Over half of this additional funding will be spent in regional areas, giving a much needed boost to these communities.
Strengthening and supporting communities
The Government is providing significant support to those affected by drought with almost $1.3 billion in additional payments and loans committed since the Election.
More than $300 million will be invested in the Drought Communities Program to help eligible councils to complete local capital works and drought relief projects.
The Government is also redirecting $200 million from the Building Better Regions Fund into drought-affected communities and funding an extra $138.9 million in Roads to Recovery in 2020 for 128 Local Government Areas impacted by drought.
The Government is also assisting drought-affected communities with two-year interest-free loans to support cash flow for farmers and other viable businesses.
Quality and safety in aged care
All Australians deserve safety and quality care as they age, so the Government is taking steps to strengthen the aged care system while the Royal Commission continues its work in the lead up to its final report next year.
The Government will provide $624 million to respond to the Interim Report of the Royal Commission, and to build on recent improvements to standards, oversight, funding, and transparency in the care of older Australians.
This includes an additional 10,000 home care packages, improved medication management, more dementia training and support for aged care workers and providers, and more work to remove younger people with disability from residential aged care.
This funding is part of the record funding that we are already providing for aged care, with total spending on aged care expected to increase from $21.4 billion in 2019-20 to $25.4 billion in 2022-23.
The Government is also working to deliver longer-term reforms that will enhance the quality of care for older Australians in line with the findings of the Royal Commission.
The Mid-Year Economic and Fiscal Outlook for the 2019-20 financial year is available via the Budget website.
