Westpac Preview The MYEFO

Westpac note that “The mid-year budget review will incorporate updated economic growth forecasts, as well as any revisions to the fiscal numbers. The figures will include the costings of policies announced since the most recent annual budget, released on Tuesday May 11.”

• “A set of new policy announcements on the day is unlikely - this is more of a “bookkeeping” exercise, with the annual budget typically the time to unveil major new initiatives and any significant resetting of the policy approach.”
• “That said, with this update occurring in the lead-up to the next Federal election, we expect the government to take this opportunity to allow for the potential cost of new policy that may be announced between now and the election. That is, the budget figuring in MYEFO will likely include an allowance for “policy not yet announced”. We have allowed for around: $3.4bn for 2021/22; rising to $6.7bn for 2022/23; and then moderating to around $4.5bn in 2023/24 and $4bn the year after.”
• “Over and above that, we think it is, in an election year, very likely that the Government will decide to extend the Lower-and-Middle Income Tax Offset (LMITO) for another year. It will not want to be criticised for increasing taxes in 2022/23 and with the Stage 3 tax cuts coming in 2023/24 this will be the last year that this “temporary” measure will be extended. This is after LMITO was introduced and then extended twice, in the October 2020 Federal Budget and in the May 2021 Federal Budget. The impact is around $8bn in 2022/23 and is included in our figuring for MYEFO.”