Australia: Reasonable budget forecasts - ANZ

According to analysts at ANZ, the Australian economy will receive a boost from cash payments, personal income tax cuts, a bigger business instant asset write-off, an earlier drop in the small business company tax rate to 25% and small additions to infrastructure.

Key Quotes

“We estimate the tax cuts and cash payments will boost household income by 0.8ppt in H2-2019, a meaningful gain.”

“The Government has also left room for more spending during the election campaign.”

“The budget forecasts seem reasonable in the short-term. Indeed, we could even describe the near-term forecasts as conservative. Longer term, the rosy fiscal outlook depends on a return to trend growth and a continuation of the increase in receipts and a fall in payments relative to GDP. This is challenging, with little buffer for downside surprises.”

“We see this as being ‘peak budget’, with attention turning from fiscal repair to distributing the gains. Ideally, we would like to see greater focus on policy changes that enhance Australia’s long-term economic prospects.”

“The politics of fiscal policy make long-term reform difficult, but we think the potential return is worth the effort.”