The Treasury expects growth to average 3 per cent a year over the next five years. Picture / Bloomberg
The Treasury expects growth to average 3 per cent a year over the next five years. Picture / Bloomberg
The Government has earmarked an extra $2.1 billion for capital spending in its election-year budget as it benefits from a stronger forecast track of economic growth in the next few years that will swell its tax take.
The Half Year Economic and Fiscal Update lifts the Treasury's economic growth forecastsfor the next three years, with real gross domestic product now expected to grow 3.6 per cent on an annual average basis in the June 2017 year, up from the 2.9 per cent pace it projected in the May budget.
On average, the Treasury expects growth to average 3 per cent a year over the next five years.
The latest Treasury forecasts add an estimated $7.6b to core Crown tax revenue between 2017 and 2020, compared to its expectation back in May. At the same time, expected core Crown expenses through to 2020 have been trimmed by a total of $2.1b.
The Treasury says economic growth is being driven by high net migration inflows and tourist arrivals, and relatively low interest rates, which are combining to stoke residential construction, services exports, market investment and private consumption.
It expects growth to moderate to a pace of 2.3 per cent by 2021 in the face of dwindling spare capacity and rising interest rates. It projects a slowdown in net migration inflows by then, which the Treasury expects will fuel wage and price pressures.
The Crown's operating balance before gains and losses (Obegal) has been reduced by $200 million to $473m for 2017 compared to the May budget before growing again by a combined $1.3b through to 2020, producing a forecast surplus of $8.5b in the year to June 2021.
The Debt Management Office has increased its 2017 domestic bond programme by $1b to $8b, with the total including $2.5b of inflation-indexed bonds.
