I like to focus on the cashflow of the National budget because this is where the trend for the country's prosperity should become first apparent. In the table below, I have detailed the year to year dollar change in each of the major catergories in the budget (source: RBA.gov.au ). The RBA also publishes the estimates for the year ending in June 2010.
We all know we are running a budget deficit, with the headline deficit for the year to June 2010 coming in at $59 Billion. The total revenue in this year's budget is $294 Billion, predicted to rise to $400 Billion in 2014. After 4 years we need the revenue line to increase by $26 Billion a year to make that target. Forgetting the past, from where we are today, you would have thought that Australia's economy is buoyant. But most of the revenue lines are in trend decline or outright decline. So if you think that you are paying enough tax today, it just needs to go up. This is the imperative of the Government for the new mining tax. The Government needs the mining tax, a resurgent economy, and more people employed to meet its target.
Current annual expenditure is running at $343 Billion, with the Government saying that it will restrict increases to 2% a year, such that by 2014 they predict the budget will be in surplus (as long as revenue targets are met). The problem is that expenses totalled $225 Billion in 2007, but was increased to the current level (a 52% increase) to meet the challenges of the Global Financial Crisis. But with Australia having only suffered a mild recession, why are expenses being held at GFC levels, and thereafter indexed at 2%?
I will keep pushing the point that our expenses are guaranteed, but our revenues are not. Why is Australia budgeting for a boom, with the major economies of the World predicting austerity measures to try and balance their budgets (Eurozone, UK), and the follow on contraction of demand. US consumption depends on their ability to fund an annual $1.5 Trillion deficit (and the World to exchange their goods for that debt).
As usual, we will keep an eye on the fundamentals.
