There is a group who should be feeling lucky – the Federal Government who have just been ‘gifted’ a bonus $1billion in tax, via that extra day in this year’s figures.
How so? GDP for Financial Year (FY) 2016 is estimated as $1.72 trillion – this is based on FY15 revenue figures, together with our estimate of 2.7 percent real growth and 1.9 percent inflation. We will come back to those figures below.
Divided by 366 days, that GDP figure becomes $4.7 billion per day. With the same effective ‘whole of economy’ 21.7 percent tax rate as FY15, Commonwealth tax receipts will work out at $1.01bn a day in FY16.
To put that in context, the government’s well-received Innovation Statement in December will cost around $1bn. So to get that paid for courtesy of a quirk in the Gregorian Calendar is quite handy. Who needs tax reform when you get extra money like that?
And the government could do with a bit of luck. KPMG’s new Quarterly Economic Outlook predicts inconsistent growth, below 3 percent GDP over the next three 3 years – until the next Leap Year! – together with slowly falling unemployment; inflation creeping up and a worsening terms of trade.
We also believe there will be a sharp decline in both business and government investment, and weak growth in real disposable income over FY16. So altogether a pretty mixed picture to say the least.
As mentioned above, KPMG expects the Australian economy to grow at 2.7 percent this financial year. While this will edge up to 2.8 percent during FY17, it is still below Australia’s long-term trend rate of 3.2 percent. The economy is operating below its potential, resulting in unemployment being ‘sticky’ at around 6 percent and the consequent financial outlook for government being less than rosy.
Essentially, the Australian economy is neither here nor there – it’s not bad enough to fall into recession, nor is it shooting the lights out in terms of output and profitability.
The report observes that employment growth of about 320,000 jobs in the past 12 months has been predominantly focused in the services sectors, while in contrast the manufacturing sector lost 50,000 jobs.
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