Mining and Heavy Industries

Commodities help drive Budget boost

Scott Morrison. Photo: file

Strong commodity prices have helped the Federal Government deliver an improved budget outlook in its mid-year update, with new figures suggesting peak debt could be $11 billion lower in FY21 than forecast six months ago.

Personal income tax cuts could be on the table after Treasurer Scott Morrison handed down the FY18 Mid-Year Economic and Fiscal Outlook (MYEFO) this week, which forecast a $9.8 billion improvement in underlying cash over the four-year forecast.

While the treasurer noted commodity prices remain “a key uncertainty to the outlook for the terms of trade and nominal GDP,” improved conditions in commodity markets have been a key driver of the improved MYEFO figures.

Iron ore is sitting at around US$70 a tonne, while thermal and coking coal prices have improved dramatically in the second half of the year.

“Global growth has strengthened significantly over the course of the year,” Morrison said.

“While the strengthening in growth was anticipated at Budget, it has accelerated by more than forecast.”

The MYEFO improved the forecast deficit from $29.4 billion in the FY18 Budget, to $23.6 billion, a deficit cut of $5.8 billion.

Pushing this through to forward estimates, the MYEFO improved the forecast FY21 surplus to $10.2 billion, from the $7.4 billion forecast in the Budget.

“The Turnbull Government has wrangled Labor’s reckless addiction to spending and is bringing the budget under control,” Morrison said.

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