Media Release - Mid-Year Economic and Fiscal Outlook 2011-12
Date published :
29
November
2011
INTRODUCTION
International growth prospects have
weakened markedly since Budget and the risks to global stability
from the European sovereign debt crisis have intensified. While
these significant global headwinds are weighing heavily on
Australia's economic and fiscal outlook, the Government remains on
track to deliver a budget surplus in 2012-13. The deterioration in
global conditions has contributed to a weaker near-term outlook for
the Australian economy than at Budget, with forecast gross domestic
product (GDP) and employment growth both revised lower. Conditions
are also expected to remain uneven, with the weaker global economy,
the high Australian dollar and cautious household spending
behaviour creating significant challenges for some sectors.
Notwithstanding the deterioration in global conditions since
Budget, the Australian economy continues to outperform the
developed world with solid growth prospects, low unemployment, a
record pipeline of resources investment, and strong public
finances. The downward revision to the economic outlook from Budget
has reduced tax receipts by over $20 billion over the forward
estimates. Lower employment growth since Budget is impacting on
taxes on wages and salaries, and volatile financial markets are
affecting equity prices and hence capital gains receipts. The
underlying cash deficit is expected to be $37.1 billion (2.5 per
cent of GDP) in 2011-12, returning to a small surplus of $1.5
billion (0.1 per cent of GDP) in 2012-13. Table 1.1 presents the
fiscal and underlying cash balances for 2011-12 to 2014-15. While
the revised outlook for revenue has made the return to surplus more
difficult than at Budget, the European sovereign debt crisis has
underscored the importance of maintaining fiscal credibility. This
is why the Government is taking steps to build savings steadily
over the forward estimates, to ensure Australia's public finances
and economy remain strong and to underpin confidence at a time of
heightened global instability.
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