Analysis of 2013/14 Federal Budget
16 May 2013
The Independent Economics analysis of the 2013/14 Federal Budget focusses on three issues.
- The economic outlook.
- The fiscal stance.
- The personal income tax burden.
The Economic Outlook
For 2013/14 we expect growth of 2.75%, which is similar to the Budget. However, the pattern of growth is different, with Independent forecasting
stronger growth in housing and consumption, and the Budget forecasting stronger growth in business investment. Our pattern of growth is more supportive of
employment. This leads us to forecast lower inemployment and higher inflation than the Budget. Under our higher inflation forecast, a further cut in the
cash rate from its current level of 2.75 per cent is not warranted.
The Fiscal Stance
The Government's objective of achieving a Budget surplus by 2016/17 is judged too slow. The Budget should be brought into surplus more quickly to
prepare for the future pressures on the Budget from moderating commodity prices and population ageing.
The Personal Income Tax Burden
The projected Budget surplus for 2016/17 relies principally on bracket creep - inflation pushing up average tax rates. In 2016/17, bracket
creep since 2012/13 and the increase in the Medicare Levy from 1.5 per cent to 2.0 per cent will add $16 billion and $4 billion respectively to the
Budget balance, resulting in a surplus of $7 billion instead of a deficit of $14 billion. Personal income tax as a share of taxable income is projected to
rise from 21.6 per cent to 23.8 per cent.
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