Amid uncertainties triggered by the Covid-19 pandemic, Treasury forecasts are critical Here is a breakdown of the main predictions
With much of how the coronavirus pandemic will unfold remains uncertain, budget assumptions are more critical than ever
The economic statement presented on Tuesday by Treasurer Josh Frydenberg assumes that many things will be fine, including that a vaccine will be available next year and that other outbreaks in Australia may be contained locally
As a big economic rebound is expected next year, Treasury officials imply it must be taken with a grain of salt, warning of « substantial uncertainty around global and domestic prospects »
Here is an overview of the key figures, forecasts and assumptions of the 2020 2020 federal budget
Unsurprisingly, there will be a blow to the economy this year What is surprising is the pace of the recovery as presumed by the Treasury
Budget documents indicate real GDP set to decline 375% in calendar year 2020 Remarkably, they also suggest real GDP may rebound by 425% next calendar year, indicating « further easing of measures containment, improved business and consumer confidence and government support ”
Budgets normally take into account the economic outlook by year compared to this period, real GDP fell by 02% in 2019-20 and is expected to decline by 15% in 2020-2021, before growing by 475% in 2021-2022
Despite these figures, the Treasury notes the difficulty of forecasting economic movements at present, pointing to substantial uncertainty over factors such as the spread of the virus, future outbreaks, as well as the timing and effectiveness of vaccines and other medical treatments
He says there is also uncertainty about « the magnitude of the longer-term economic effects of the pandemic, » adding: « the uncertainty and the reintroduction of containment measures could significantly reduce activity? ???
Fluctuations in commodity prices can have a big impact on tax revenues and nominal GDP This budget assumes iron ore prices to drop to US $ 55 per tonne by the end of the June 2021 quarter
A population-wide Australian Covid-19 vaccination program – expected to be fully in place by the end of 2021 -, with social distancing restrictions until a vaccine is released fully available
Restrictions in Victoria are phased out over the remainder of 2020 in line with the Victorian government’s easing roadmap
State border restrictions lifted by the end of 2020, with the exception of Western Australia, which is slated to open from April 1, 2021
A gradual return of international students and permanent migrants – until the end of 2021 – although there are « small, phased pilot programs starting to return international students from the end of 2020 » ????
Inbound and outbound international travel « is expected to remain low until the end of 2021, after which a gradual recovery in international tourism is also expected to occur »
Net migration abroad is expected to increase from 154,000 people in 2019-2020 to 72,000 negative people by the end of 2020-2021, before gradually increasing to around 201,000 people in 2023-24
We knew the deficit would be high; now we know how much: $ 213 7 billion in fiscal year 2020-21, the highest underlying cash deficit since WWII This equates to 11% as a share of the economy Deficits will remain at high levels for years to come, but is expected to drop to $ 112 billion next year, followed by $ 879 billion in 2022-2023 and $ 669 billion in 2023-24
For the side of politics that has made it a virtue to generate a surplus, there is none in sight: the Treasury suggests that the deficit could still reach $ 50 billion, or 16% of GDP, in a decade – 2030-31 According to last year’s budget, surpluses would reach 1% of GDP by 2026-2027
Debt will grow quickly to help prop up the economy Net debt stood at $ 491 million last year and will rise to $ 703 billion, or 36% of GDP, this fiscal year before peaking at 966 billion dollars or 44% of GDP in June 2024 Net debt will still represent around 40% of the economy in the early 2030s Gross debt, meanwhile, will reach $ 1tn in 2023-24
Budget documents say don’t worry about these borrowing levels: as a part of the economy, they remain sustainable and are low compared to most other advanced economies
The Treasury predicts that unemployment will remain high for several years, but that it will peak at 8% in the December 2020 quarter This is motivated by « headwinds resulting from ongoing international and national border closures, continued social restrictions in Victoria, ongoing corporate restructuring and the impact of increased participation ”
Adding to signs that people will feel this recession for a long time, budget documents suggest that unemployment will be at 725% in 2020-2021, 65% in 2021-2022, 6% in 2022-2023 and 55% in 2023- 24 The Coalition recently revamped its budget strategy to say that the government should keep spending heavily until unemployment returns comfortably below 6% (Last year’s budget was around 5%)
For those who still have a job, the salary outlook remains bleak Wages are expected to increase by just 125% this fiscal year and 15% next fiscal year, before reaching 2% in 2022-23
Budget Says Inflation To Stay ‘Low By Historical Standards’ After falling 03% in 2019-20, the consumer price index is expected to rise 175% in 2020-2021 and 15% the following year The Treasury says this means the CPI is unlikely to return to the low of the Reserve Bank’s target range of 2% to 3% until the end of the forecast estimates for the budget period
There are some impressive numbers when it comes to Australia’s international engagement For example, international visitor arrivals between April and July fell by more than 98% compared to the same period last year
Overall, the budget cuts exports 9% in 2020-2021, then increases 2% in 2021-2022 When we look specifically at service exports, they are expected to drop 37% in 2020 -2021 and 45% in 2021-22 â ???? driven by tourism successes and a slow return to international education But mining exports are expected to increase by 05% in 2020-2021 and 4% in 2021-2022 due to « strong demand for iron ore from China » despite trade tensions and a gradual recovery in other key export partners
Imports are forecast to fall 95% in 2020-2021, after dropping 71% the previous year, largely due to a decrease in the number of Australians traveling abroad, which counts as imports tourist
Population growth is expected to slow to its lowest rate in over a century (02% this fiscal year) This change is driven by falling net migration abroad and by some families delaying their children due to the current uncertainty On this last point, the total fertility rate is supposed to decrease69 babies per woman in 2019-20 to 158 in 2021-2022, before rising to 169 in 2023-24 But there will be a general gradual trend towards families with children later in life and fewer children when they do, declining to 162 babies per woman in 2030-31 â € “ contributing to a persistently lower rate of population growth in the medium term than that assumed in the last mid-year budget update
Josh Frydenberg, Australia
World News – AU – Budget Assumptions: How Coalition’s Economic Plan 2020 is counting on much progress for Australia
SOURCE: https://www.w24news.com