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Chinese Economic Performance Helps Australia Make Bolder Budget Surplus Forecast
Jan 02, 2018

 The  Australian government has provided an update on the nation's economic  outlook, forecasting a $7.8 billion budget surplus by 2021.

 

China  has been credited as a key player in the positive forecast with the  country's strong manufacturing sector contributing to Australian  commodity prices, notably that of iron ore, being higher than forecast.

 

Australian  Treasurer Scott Morrison on Monday released the Mid-Year Economic and  Fiscal Outlook (MYEFO), detailing new cuts to welfare and higher  education.

 

Morrison  said that strong commodity prices in 2017 and higher-than-forecasted  company profits resulted in more tax being paid in Australia than  expected, raising the projected 2021 surplus to $7.8 billion, up $2.06  billion from projections in the May budget.

 

The  May budget made its forecasts based on an average iron ore price of $55  per metric ton but it has risen to as high as $80 per ton in the seven  months since and currently sits at 70.

 

That  alone has poured an extra $2.2 billion into Australia's economy.  Despite the upturn, the Treasury department again forecast an average  iron ore price of $55 per ton, indicating they expect prices to  moderate.

 

The  deficit for 2017-18 has been reduced to $18.07 billion, Morrison said,  and will be slashed to $1.9 billion in 2019-20 before reaching surplus  the following year.

 

The country has also benefited from the highest jobs growth in decades meaning fewer people were receiving welfare payments.

 

Mathias  Cormann, Australia's Finance Minister, said the result was so good that  the government could stop borrowing money to fund day-to-day business.

 

"That's a year earlier than anticipated at the time of the budget," Cormann told reporters in Canberra on Monday.

 

"It will be the first time since the global financial crisis."

 

The report also highlighted lower than expected spending as a key reason for the improvement.

 

"We had much lower-than-expected consumption growth in the September quarter, just 0.1 percent," Morrison said.

 

"There  was, rightly, a lot of concern about what was happening with household  living costs, particularly energy prices. That's why the National Energy  Guarantee (NEG) and other measures have been put in place. We would  hope to see better consumption figures going forward."

 

That  fall in consumer spending was responsible for expected Gross Domestic  Product (GDP) growth in 2017-18 to be revised down from 2.75 percent to  2.5 percent.

 

GDP growth is projected to rise back to 3 percent in 2018-19 and remain steady until 2020-21 at the earliest.

 

Morrison and Cormann also unveiled a series of cuts on Monday, including $1.6 billion' worth to the university sector.

 

The  criteria that newly-settled immigrants have to tick before they are  eligible for welfare payments have also been expanded, a measure the  government said would save $920 million over four years.

 

The  report was published as the Australian Taxation Office (ATO) revealed  plans to pursue multinationals who pay no tax in Australia after it was  revealed that more than a third of them do not do so.