Australia’s conservative government on Monday forecast the country’s strongest budget outlook in 10 years, arming Prime Minister Scott Morrison with a war chest large enough to allow for possible tax cuts ahead of an election in less than six months.
Treasurer Josh Frydenberg said Australia’s budget deficit for the fiscal year to June 2019 would shrink to A$5.2 billion ($3.7 billion), from the A$14.5 billion projected back in May.
Australia will then deliver a budget surplus by 2019/20, ending more than a decade of deficits.
“The combination of a growing economy with a record number of people in work is helping both sides of the ledger, increasing our revenues while also decreasing our expenditure,” Frydenberg told reporters in Canberra.
The Liberal National government headed by Morrison touted the improved numbers as evidence of its economic competence ahead of an election next year.
The coalition is trailing badly in opinion polls after ousting former prime minister Malcolm Turnbull in a party coup in August.
Keen to campaign on his government’s economic record, Morrison last month said Australia’s annual budget would be delivered in April 2019 instead of the end of May when it was due.
Finance Minister Mathias Cormann hinted tax cuts will be a centrepiece of the government’s bid for re-election, and economists said Morrison now has sufficient resources.
“The budget numbers actually look quite conservative. We’ve been tracking the rolling revenue figures and they could have predicted even better figures,” David de Garis, a director of economics at National Australia Bank, told Reuters.
“It’s possible they have built in room for some pre-election tax cuts. With the housing market suffering, there’s a good case for fiscal stimulus next year.”
Despite the uncertainty lingering over some sectors of the economy, the government predicted the economy would grow at 3 percent in 2018/19 and the two years following.
The forecast for unemployment was lowered to 5 percent, recognising surprising strength in employment this year which has already pushed the jobless rate down to that level.
Wage growth, which has been stubbornly sluggish, was predicted to pick up to 3.5 percent by 2020/21, from the current 2.3 percent. Wages were growing at a record low of 1.9 percent as recently as 2017.