TREASURY today forecast a $3.5 billion surplus in fiscal 2012-13, upwardly revising a figure it released just 10 days earlier.
The projections, in a Pre-election Economic & Fiscal Outlook - required by law to be released ahead of the August 21 election - compare with a $3.1bn surplus forecast for the same period on July 14, just before the election was called.
Treasury lowered its forecast surplus for fiscal 2013-14 to$4.5bn from $4.8bn, and is now forecasting a deficit of $40.7bn in the year that started July 1, up from $40.4bn.
All other expectations for the economy were unchanged.
However, the report warned that there were “substantial downside” risks to the world economic outlook.
These include the “European sovereign debt crisis, uncertainty over whether the US recovery will gain traction, the challenge in China addressing overheating and the difficulty across the advanced economies in managing fiscal consolidation in a fragile global environment”, it said.
Despite these uncertainties, robust growth in the Asian region was expected to continue to generate strong demand and high prices for non-rural commodities, the report said.
Employment is expected to grow strongly, with the unemployment rate expected to decline to 4.75 per cent in late 2011-12, “around its full employment level”.
It said there are upside risks to the forecast of 2.75 per cent inflation in both 2011 and 2012, with the labour market reaching full capacity over the next year and the strong incomes boost from the terms of trade.
This was expected to see “demand increasingly stretch the economy's supply capacity”.
Additional reporting by AAP