Hawker Britton Occasional Papers and Media

Mid-Year Economic and Fiscal Outlook 2008-09

November 2008

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Treasurer Wayne Swan today released the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) for 2008-09.  The MYEFO has been much anticipated as it indicates the extent of the effects of the global financial crisis on the Budget.

The Treasurer explained that ‘the sharp deterioration in the global economic outlook, and the resulting fallout for the Australian economy, is forecast to result in more moderate GDP and employment growth.’

The MYEFO shows that as a consequence of the global financial crisis, expected taxation receipts have been revised down by $4.9 billion in 2008-09, $12.2 billion in 2009-10, 12.4 billion in 2010-11 and $7.9 billion in 2011-12.  This totals approximately $40 billion lower over the forward estimates than was anticipated at the time of the May Budget.

These downward revisions to revenue are particularly the result of lower forecasts of capital gains tax due to the recent dramatic falls in global equity markets. These revisions also reflect the substantial negative impacts on company profits of the credit market turmoil, weaker global growth, and from 2009-10, falling terms of trade.

-Treasurer Wayne Swan

Notwithstanding significant challenges developing from the global financial crisis, the Australian economy is expected to continue to grow in 2008‑09. The Government is also continuing to budget for surpluses in 2008‑09 and across the forward estimates.

Table 1.2: Major economic parameters (a)

Almost all of the decrease in the surplus beyond 2008-09 is due to the significant reductions in revenue associated with the global financial crisis. Policy decisions have had relatively little impact on estimated expenses and revenues in these years.

The Government has taken decisive action to strengthen the economy throughout the global economic crisis. For further details see Hawker Britton’s paper on the Government’s response to the Global Financial Crisis.

The Mid-Year Economic and Fiscal Outlook is available at: http://www.budget.gov.au/2008-09/content/myefo/html/index.htm.

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