Research Briefing | May 18, 2021

Australia | Budget windfalls parlayed into more stimulus

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Australia’s remarkably strong economic performance since the onset of the pandemic has led to a marked revision to the budget deficit this year; the Treasury now expect a deficit of 7.8% of GDP in FY21, against a forecast of 11% from six months earlier.

What you will learn in this comprehensive 4 page report:

  • The fast-tracked labour market recovery has resulted in less spending on support services than was anticipated and has boosted income tax and GST revenues. Record high commodity prices have also been a boon for the government’s coffers.
  • But rather than bank these gains and embark on the task of budget repair, the government has opted to provide additional stimulus to the economy. This will provide further impetus to the recovery in the near term. 
  • There were relatively few surprises in the Budget, and our most recent forecast revisions largely pre-empted policy changes. Public demand was revised higher (although a further upgrade is still to come), and we expect the participation rate (for women in particular) will receive a long-term boost.

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