I would just like to make a few comments about the headline numbers of the budget.
There were no net expenditure cuts, which was opposite of what was expected. The budget relies totally on an increase in revenue and a booming economy. This budget was not a dissimilar framework to the high hope budget presented last year.
Expenditure for 2011 is $349.7 billion
Expenditure for 2012 is forecast to be $362.1 billion - a 3.55% increase. Hardly fiscal austerity.
Expenditure for 2013 is forecast to be $372.1 billion - a 2.7% increase. Expenditure is a guaranteed outcome, whereas all the wishful thinking will be on revenue.
Revenue for 2011 is $303.7 Billion - a $46 Billion shortfall this year.
Revenue for 2012 is forecast to be $342.4 Billion. A 12.74% increase over a year. Boom time indeed.
Revenue for 2013 is forecast to be $378.5 Billion. A 10.5% increase over 2012.
As mentioned previously, tax revenue is based on a percentage of GDP. The forecast GDP growth figures built into the budget are as follows: GDP for 2011 is forecast to be $1,386 Billion, rising by a nominal 6.4% in 2012, followed by a nominal 5.5% in 2013. This is an overall 12.32% increase over 2 years or an increase in GDP of $170 Billion.
Also mentioned previously, GDP is linked to bank debt growth. Recent history shows that it takes about $2 dollars of debt for a $1 increase in GDP. So we can expect, on these forecasts, about a $370 Billion increase in bank debt over the next 2 years. And if this is true, the major bank shares will be the main beneficiaries.
These figures are not dissimilar to the forecasts I made 2 weeks ago. I figured that expenditure would increase by 2% per year, with a balanced budget forecast by 2013 - which is pretty much in line with tonight's outcome.
The share market certainly hasn't embraced these growth figures, but any sign that growth is starting to appear will figure in the forward indicators. Overall, no net expenditure cuts is positive for the income of the economy, with cautious optimism for the economy's growth prospects.