The Federal Government has released the 2011-12 Mid-Year Economic and Fiscal Outlook (MYEFO), outlining what the government describes as ‘solid economic growth, low debt and a return to surplus in 2012-13’.

 

The Federal Government has remained optimistic in its goal to return the budget to surplus in the 2012-13 financial year, despite recent global deterioration cutting an estimated $20 billion from government revenues.

 

“Global economic and financial conditions have deteriorated markedly in recent months, and the risks to global stability from the European sovereign debt crisis have intensified. Global growth prospects have been downgraded markedly in 2012, with the euro area expected to return to recession,” Treasurer Wayne Swan said.

 

Real GDP is now expected to grow by 3¼ per cent in 2011-12 and 2012-13, downgrades of ¾ of a percentage point in 2011-12 and ½ of a percentage point in 2012-13.

 

“Global developments have impacted on our share market, on trade outside of the mining sector and on confidence, with consumers becoming more cautious and businesses more reluctant to expand their workforce in the current uncertain global environment,” Mr Swan said.

 

Mr Swan was quick to rule out large scale government cuts, saying that such moves would be counter-intuitive to the goal of returning to surplus.

 

“Australia will return the budget to surplus ahead of all major advanced economies, and government net debt peaks dramatically lower than in these countries at 8.9 per cent of GDP in 2011-12, before falling to 7.7 per cent of GDP in 2014-15. This is less than a tenth of the average net debt position of the major advanced economies expected in 2016 of 92.9 per cent of GDP,” Mr Swan said.

 

The mid-year release comes as the OECD has outlined its confidence in Australia’s economic fundamentals and outlook, with the report saying that high levels of employment, investment and a strong mining sector will continue to buoy the economy.