Australian Government Downgrades Economic Growth, Budget Surplus Outlooks
Arslan Butt • 1 min read
The Australian government revised its economic growth outlook and budget surplus expectations lower over the next four years. The government expects the budget surplus for the current fiscal year ending June 2020 to come in at AUD 5 billion, down from the previous estimates of AUD 7.1 billion.
On the positive side, the Australian government is still optimistic about posting a budget surplus for the first time in 10 years. Meanwhile, the GDP forecast has been revised lower to 2.25% for 2019-20, from the previous estimate of 2.75% for this period. The Australian government, however, has kept the GDP forecast for 2020-21 steady at 2.75%.
The economic growth estimates have been lowered on the back of a slowdown in wage growth and household spending and increasing unemployment. Wage growth is expected to reduce to +2.25% from +2.75% for 2019-20 while it could improve to +2.75% in the next fiscal year. The Australian government is expected to rise to 5.25% in the current and next year, rising higher than the 5% previously estimated.
As a result of the continued weakness in the Australian economy, markets are expecting the RBA to cut rates by another 0.5%. There is also a possibility that the RBA could resort to implementing bond purchase programs.