Growth to slow this year, but to pick up to 3% annual over the next two years, debt to continue rising and worryingly, no improvement in wages for much of the next four years.
Unemployment won’t fall very much either and neither will slow wage growth which remains the key problem for the economy and the country’s 12 million strong work force.
The budget forecasts the wage price index will rise from 2% this financial year (it is currently 1.9%) to 2.5% next year and 3% by 2018-19. Inflation will rise from 2.2% to 2.5% and stay there, meaning real wage growth will be slow to emerge.
The unemployment rate won’t change much from 5.75% this year to 5% in four years time – that is hardly a big movement.
Nominal GDP is forecast to grow by 6% this financial year because of the boost to our terms of trade from the resources prices boomlet late last year and in the early months of 2017.
That has largely gone – especially for iron ore, so the budget is a gamble on that boomlet lasting – that’s too hard to forecast.
The Federal deficit will fall to a surplus to $7.4 billion in 2020-2021 from $29.4 billion in 2017-18 and $37.6 billion in 2016-17.
New taxes, including the levy on the big five banks, and a lift in the medicare levy, will raise almost $21 billion of new tax revenue over the next four years, and help give the Turnbull government a modest surplus by 2021.
To accommodate the rising debt, Mr Morrison has lifted Australia’s credit limit to $600 billion as debt continues to rise.
The Treasurer issued a direction to increase the value of stock and securities that are on issue – which is how much the government can borrow.
The figure hit $490 billion as of May 5, according to the Australian Office of Financial Management.
Growth in the Australian economy is expected to rebound to 2.75% in 2017-18 and 3% in 2018-19 as the slide in the mining investment boom eases and as growth in household consumption and non-mining business investment improves.
“As the transition progresses, jobs are continuing to be created in the services and construction sectors,“ Mr Morrison said.
"Resource exports will continue to support growth. Strong demand from Asia for Australia’s tourism and education services will also drive further rapid expansion in our services exports.”
The Government is extending the $20,000 instant asset write-off for a further 12 months to 30 June 2018 for businesses with annual turnover less than $10 million, improving their cash flow and helping them to reinvest in their business and replace or upgrade their assets.
There will be $75 billion of infrastructure spending over the next decade. That will include a potential buy-out of the Snowy Hydro scheme from Victoria and NSW, and a $20 billion "once in a generation" rail line upgrade.
