Treasurer Josh Frydenberg says the Australian economy is recovering strongly from the pandemic, with an “incredible set” of job numbers released on Thursday.
“Australia has outperformed every other advanced economy throughout the pandemic,” he said.
“The improved budget position is being driven by the stronger than expected recovery in our labour markets.“
The Mid-Year Economic and Fiscal Outlook, released on Thursday, also forecasts wages growth to outstrip inflation over the four-year forward estimates.
“Despite the impact of delta, which saw 13 million of our fellow Australians subject to an extended lockdown, today’s updated numbers show a stronger outlook than what was forecast in May,” Frydenberg said.
“Real GDP is expected to grow by 4. 5 per cent in 2021, and by 4.25 per cent in 2022, reflecting strong and broad-based momentum across the economy.
“The underlying cash balance in 21-22 is expected to be a deficit of 4.5 per cent of GDP, a $7.4 billion improvement since the previous budget.
“Across the forwards, the budget is $2.3 billion better off than forecast in this year’s budget.”
The federal government has squired away $16 billion in spending decisions to be unveiled between now and the federal election in a mid-year budget update which shows only a $2.3 billion improvement to the bottom line over four years, before a deterioration in deficits over the medium term.
Wages are forecast to grow by 11.25 per cent between this financial year and 2024-25 while inflation is tipped to grow by 10.25 per cent.
In the May budget, inflation and wages were both forecast to rise by 9 per cent over the four-year forward estimates period.
The MYEFO, which could be the springboard to the federal election, shows the budget expects to receive an extra $106 billion in revenue over four years since the May forecasts, including $95 billion in tax revenue.