VIEW: Westpac Expects Material Increase In Borrowing In May Budget

The Budget Policy Statement (BPS) set out the government’s priorities and gave an updated economic outlook. Tax cuts will be the “centrepiece” of the May 30 budget and so Westpac doesn’t expect the details of their timing and size to be announced beforehand.

• “We expect that the Government will seek to forecast at least a small surplus in 2027/28 – a goal that the Minister of Finance has described as “achievable but not a given”. However, it remains to be seen whether this can be accomplished by Budget 2024.”
• “Today’s news confirms that the government borrowing programme will likely be raised significantly when Budget 2024 is released on 30 May. Given the extent of the downgrade in the tax forecasts, the size of that increase could be as much as $15bn across four years rather than the $7-10bn we surmised in our BPS Preview. However, much will depend upon decisions taken between now and the Budget, especially regarding the size and timing of tax cuts.”
• “The Treasury now expects (annual average) real GDP growth of 0.1% in the 2023/24 fiscal year, down from 1.5% forecast in the HYEFU. Real growth is expected to pick up 2.1% in 2024/25 and 3.1% in 2025/26.”
• “The government has set a long-term goal of achieving an operating (OBEGAL) surplus that is sufficient to ensure consistency with the debt objective. In part it will do this by managing core Crown expenses down towards 30% of GDP from 33% at present.”