Australia Weathers Fiscal Storm

by Mary Swire, Tax-News.com, Hong Kong

28 September 2010

While Australia avoided economic recession, the sharp falls in global commodity prices and business profits that accompanied the global recession had a big impact on tax revenues and the country’s overall budgetary outcome.

The Final Budget Outcome for 2009-10 showed that the government’s fiscal position felt the full force of the global financial crisis, with revenues downgraded by almost AUD50bn (USD80bn) from their pre-crisis level, a loss of almost one-sixth of forecast tax receipts.

However, the outcome for 2009-10 did represent a small fiscal improvement from the estimate at the time of the 2010-11 Budget in May. The Australian general government sector recorded an underlying cash deficit of AUD54.8bn, or 4.2% of gross domestic product (GDP), for 2009-10. This was AUD2.3bn less than the estimate made in May.

Australian public sector net debt was AUD42.3bn, or 3.3% of GDP, at the end of 2009-10. This is much lower than the levels of net debt for the major advanced economies, which were said to average a collective 70% of GDP in 2009 and, according to the government, shows Australia's fiscal position is in a far better condition than the budgets of other comparable nations.

The government’s statement on the 2009-10 Budget Outcome pointed out that economic growth in Australia is now strengthening and tax receipts are recovering. Combined with continued spending restraint, the government confirmed that it expects to see the budget return to surplus in 2012-13.

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