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Budget 2016 Home Page Budget Economic and Fiscal Update 2016

Comparison with the Half Year Update

The Half Year Update was published on 15 December 2015. Since then, there have been a number of developments that have significantly impacted the fiscal outlook. Table 2.10 below summarises the changes in the key fiscal indicators since then.

Table 2.10 - Key fiscal indicators compared to the Half Year Update
Year ending 30 June
$billions
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
5-year Total

Core Crown tax revenue

           
Budget Update 69.7 72.0 75.7 80.2 84.4  
Half Year Update 68.4 71.0 75.1 79.9 84.0  
Change 1.3 1.0 0.6 0.3 0.4 3.6

Core Crown expenses

     
Budget Update 74.4 77.4 79.7 82.0 84.8  
Half Year Update 74.9 76.8 80.7 83.3 86.2  
Change (0.5) 0.6 (1.0) (1.3) (1.4) (3.6)

OBEGAL

     
Budget Update 0.7 0.7 2.5 5.0 6.7  
Half Year Update (0.4) 0.4 1.0 3.5 4.9  
Change 1.1 0.3 1.5 1.5 1.8 6.2

Core Crown residual cash

     
Budget Update (2.1) (4.2) (2.1) 2.0 3.9  
Half Year Update (5.4) (4.7) (2.8) 0.5 1.9  
Change 3.3 0.5 0.7 1.5 2.0 8.0

Net core Crown debt

     
Budget Update 62.3 66.3 68.3 66.3 62.3  
Half Year Update 65.9 70.7 73.4 72.8 71.1  
Change (3.6) (4.4) (5.1) (6.5) (8.8)  

Net worth attributable to the Crown

     
Budget Update 83.5 86.6 91.6 99.3 108.9  
Half Year Update 86.9 89.6 93.1 99.3 107.2  
Change (3.4) (3.0) (1.5) - 1.7  
Year ending 30 June
% of GDP
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast

Net core Crown debt

   
Budget Update 24.9 25.6 25.0 23.1 20.8
Half Year Update 26.9 27.7 27.1 25.6 24.0
Change (2.0) (2.1) (2.1) (2.5) (3.2)

Source: The Treasury

A stronger economy has improved the fiscal outlook...

Stronger economic growth since the Half Year Update has improved the fiscal outlook, with tax revenue now expected to be higher in each year of the forecast period.

Core Crown tax revenue forecasts have been revised up by a combined $3.6 billion across the forecast period, mainly owing to the cumulative $17 billion increase in the forecasts (from 2015/16 to 2019/20) for nominal GDP. Forecasts for most of the major tax types have been increased as a result of this stronger nominal GDP outlook with the exception of RWT which is lower than in the Half Year Update owing to lower interest rates (Figure 2.21). Table 2.11 below summarises the movements by tax type since the Half Year Update.

Figure 2.21 - Movement in core Crown tax revenue since the Half Year Update
Figure 2.21 - Movement in core Crown tax revenue since the Half Year Update.
Source: The Treasury
Table 2.11 - Reconciliation of the change in core Crown tax revenue
Year ending 30 June
$billions
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
5-year Total
Core Crown tax - 2015 Half Year Update 68.4 71.0 75.1 79.9 84.0  
Movement in core Crown tax:            
                Corporate tax 0.7 0.3 0.2 0.3 0.4 1.9
                Other persons' tax 0.2 0.2 0.2 0.3 0.3 1.2
                GST 0.1 0.2 0.3 0.3 0.1 1.0
                Source deductions 0.2 0.4 0.2 - (0.2) 0.6
                RWT (0.1) (0.2) (0.4) (0.5) (0.3) (1.5)
                Other taxes 0.2 0.1 0.1 (0.1) 0.1 0.4
Total movements since the Half Year Update 1.3 1.0 0.6 0.3 0.4 3.6
Core Crown tax revenue - 2016 Budget Update 69.7 72.0 75.7 80.2 84.4  
As a % of GDP 27.9% 27.8% 27.7% 27.9% 28.2%  

Core Crown tax movements consist of:

           
Policy initiatives - - (0.1) 0.1 0.1 0.1
Forecast changes 1.3 1.0 0.7 0.2 0.3 3.5

Source: The Treasury

Corporate tax forecasts are $1.9 billion higher than in the Half Year Update. Company income tax receipts were substantially above the Half Year Update forecast as at the end of March 2016, whereas company income tax revenue was only slightly above forecast. This higher forecast tax base in 2015/16, together with a profit growth profile across the forecast period similar to that of the Half Year Update, has also increased the corporate tax forecast in 2016/17 and later years.

This Budget Update forecast contains an assumption that corporate tax revenue will largely “catch up” to receipts over the remainder of the current fiscal year, resulting in a $0.7 billion increase in the corporate tax revenue forecast in 2015/16.

The forecasts for entrepreneurial income, excluding the agriculture sector, are higher than in the Half Year Update which has resulted in a $1.2 billion increase in the other persons' tax forecast.

The GST forecast is $1.0 billion higher in total than in the Half Year Update owing to stronger forecasts of nominal consumption.

A higher forecast for employment growth has pushed the source deductions forecast higher than in the Half Year Update through 2015/16 to 2017/18. However, the weaker wage growth forecast, in response to the lower inflation forecast, has decreased the source deductions forecast. Towards the end of the forecast period, the wage growth effect dominates the employment growth effect such that, by 2020, the source deductions forecast is around $0.2 billion lower than in the Half Year Update.

In contrast to the above tax types, interest rate forecasts are lower than in the Half Year Update, which is the main contributor to the $1.5 billion reduction in interest RWT forecasts across the forecast period.

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