Today's final budget outcome for 2008-09 shows a modest fiscal improvement reflecting the effects of economic stimulus as well as some one-off factors, but also highlights again the fiscal challenges presented by the global recession.
The Australian Government general government sector recorded an underlying cash deficit of $27.1 billion (2.3 per cent of GDP) for 2008-09. This outcome was $5.0 billion better than expected at the time of the 2009‑10 Budget, reflecting lower than anticipated spending of $2.2 billion and higher cash receipts of $2.8 billion.
This stronger than expected outcome is the result of a combination of various one-off factors and the effects of the Government's economic stimulus which has contributed to stronger economic outcomes.
Total tax receipts were $3.3 billion above the estimate at the 2009‑10 Budget, primarily due to stronger than expected company income tax receipts of $3.6 billion, partly offset by lower than expected personal income tax receipts of $0.5 billion.
Lower spending was due to a number of one-off factors, as well as lower income-support payments, including a reduction in payments of $138 million for the Newstart Allowance. This outcome reflects in part the success of our economic stimulus which has meant more Australians in jobs and fewer Australians collecting unemployment benefits than would otherwise be the case.
The stronger budget outcome is also reflected in a significant improvement in the expected Australian Government net debt position. At the end of 2008-09, the level of Australian Government net debt was -$16.1 billion, which is $11.5 billion better than expected at the time of the 2009-10 Budget.
The stronger than expected final budget outcome does not substantially diminish the fiscal challenge imposed on Australia by the global recession, which has resulted in the largest fall in budget revenues compared with its comparable budget year forecast since 1930-31.
However, Australia continues to have lower debt and lower deficits than other major advanced economies. The level of Australian Government net debt at 1.3 per cent of GDP in 2008-09, is dramatically better than 59 per cent of GDP reported for the major advanced economies in 2008.
The Government is fully committed to its fiscal strategy to return the budget to surplus as the global economy recovers. This strategy will ensure Australia's net debt remains lower than any of the major advanced economies.
However, the effects of the global recession will be felt in Australia for some time, with ongoing impacts on the Budget and further rises in unemployment.
An electronic version of the Final Budget Outcome 2008-09 can be found at: http://www.budget.gov.au/
29 September 2009