News: Australia to forecast fatter 2019/20 budget surplus despite slowdown

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    SYDNEY, Sept 18 (Reuters) - Australia's budget surplus for the current fiscal year is likely to be bigger than initially forecast, the country's treasurer said on Wednesday, with stronger export receipts and tax revenues boosting government coffers.

    The government will publish its "Final Budget Outcome" for the 2018/19 fiscal year ended on June 30 on Thursday, Treasurer Josh Frydenberg told Australia's parliament. The report will also include revised estimates and outlook for the current financial year.

    "It will show an improvement on what was forecast, not only in the 2018/19 budget, but also what was forecast in April this year with the 2019/20 budget," Frydenberg said.

    The government in its budget handed down in April forecast a A$4.2 billion ($2.9 billion) deficit for 2018/19 and a A$7.1 billion surplus for 2019/20. If delivered, it would be the first surplus since 2007/08, before the global financial crisis hit.

    There is also separate speculation Frydenberg could report an earlier-than-expected surplus for 2018/19, led by a surge in the price for iron ore, Australia's top export, and solid demand from key trading partner China.

    A boost to Australia's budget outlook would be a fillip for Prime Minister Scott Morrison who was re-elected in May largely on his government's credentials as a prudent economic manager.

    However, a return to surplus might not be enough to boost confidence as activity outside of exports has hardly been encouraging. Gross domestic product (GDP) growth has slowed to decade lows, retail spending is contracting, car sales collapsing and consumer and business confidence is falling.

    Australia's GDP rose just 1.4% in the June quarter from a year earlier, matching the worst of the global financial crisis and well short of the 2.75% considered "trend". Economists do not expect much improvement in the current quarter.

    The remarkable slowdown prompted the Reserve Bank of Australia (RBA) to cut interest rates in both June and July to reach a historic low of 1%.

    Financial markets 0#YIB: are pricing in two more rate reductions by early 2020, with some economists predicting a cut to 0.75% as soon as October.

    The RBA has repeatedly called for fiscal action with Governor Philip Lowe recently highlighting the limits of monetary policy in stimulating medium-term growth, saying it only pushes up asset prices.

    But Frydenberg has held firm against calls for greater spending, insisting Australia must repay government debt first.

    ($1 = 1.4603 Australian dollars)

 
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