The Federal Government’s financial position continues to deteriorate.
The latest monthly snapshot of Commonwealth finances shows the deficit reached $35.48 billion in the 12 months to December – $763 million larger than was predicted in the Mid-Year Economic and Fiscal Outlook, which came out only a month ago.
It means there is going to be no let-up in the pressure on Federal Ministers to find savings ahead of the election year Budget released on 10 May.
But, promisingly for the Government, the deterioration in the Budget position was largely due to higher-than-expected cash payments than yet another unexpected revenue write-down.
In fact, there are some small signs that the flood of red ink that has drenched the tax revenue columns of Budget for the past few years may be starting to slow.
Gross income tax receipts ($87.6 billion for the financial year-to-date) were a little weaker than forecast in MYEFO ($88.1 billion), but recent jobs growth will spur hope of a strengthening in that revenue stream.
Even more optimistically, company tax receipts reached $30.82 billion so far this financial year – about $750 million more than anticipated in MYEFO.
Of course, this month’s sharemarket plunge might yet cruel this improvement.
Another cause for optimism is that GST receipts were mareginally stronger than expected, reflecting the increased willingness of consumers to shop and firms to invest.
If this improvement in activity, as reflected in the tax revenue figures, is sustained, then hopes that the country is well advanced in its adjustment to the end of the mining investment boom – – aided by the weakening of the dollar – will appear increasingly well founded.