It is a great pleasure to be here with my good friend and colleague, the Finance Minister Mathias Cormann, releasing the Final Budget Outcome for 2017-18. The figures today demonstrate that the Australian economy is on track. It's growing strongly and has good momentum.
Australia is in its 27th year of consecutive economic growth, and we recently released the National Accounts, which showed that the Australian economy grew 3.4 per cent through the year, which was faster than any G7 country, which was faster than the OECD average, and which was growing at its fastest rate since the height of the mining boom in 2012.
We also had news last week that Standard & Poor's had re-affirmed Australia's AAA credit rating and Australia is one of only 10 countries that has a AAA credit rating from the three major agencies.
Now, today's Final Budget Outcome is for 2017-18 and the underlying cash deficit was $10.1 billion, which is, as a share of the economy is 0.6 per cent of GDP. This is the smallest deficit in a decade, and compares to the peak deficit of 4.2 per cent of GDP under Labor in 2009-10.
It confirms that we are on path back to balance in '19-20, and the outcome for '17-18 was a $19.3 billion improvement on the estimate which was outlined at the time of the '17-18 Budget. A $19.3 billion improvement on the estimate outlined at the time of the '17-18 Budget.
Receipts were $13.4 billion higher than expected, reflecting the record number of people in jobs and our growing economy. Total cash payments were $6.9 billion lower than estimated at the time of the '17-18 Budget. Mathias will have more to say about those figures in a moment.
And since coming to office, the Coalition has legislated $50 billion in savings, and we've kept spending real growth down to 1.9 per cent, which is the lowest of any government in 50 years.
Today's outcome is the result of a strong economy. Nominal GDP grew by 4.7 per cent, which was stronger than the '17-18 Budget forecast of 4 per cent. Labour market conditions continue to be strong with almost 350,000 jobs created in '17-18; around a thousand jobs a day.
Employment grew by 2.7 per cent through the year to the June quarter which compares to 1.5 per cent forecast at the time of the Budget. Today's numbers are again an indication that we are on track and our economic plan is working.
But we cannot be complacent and we cannot risk a return to Labor, because Labor's proposal is for more tax and spending, less jobs, and lower growth and that will be a bad result for the Australian economy and Australian families and businesses. Mathias.
Thank you very much Treasurer. When we came into Government five years ago, the Australian economy was weakening, unemployment was rising and the federal Budget position was rapidly deteriorating. We came into Government with a plan to deliver stronger growth, more jobs and to repair the Budget.
What this Final Budget Outcome for 2017-18 demonstrates is that our plan is working. The economy is stronger, the economic growth outlook is stronger, employment growth has been much stronger than anticipated and indeed the Budget is in a much stronger position than was anticipated when we delivered the 2017-18 Budget.
Stronger growth and more jobs means better opportunities for Australian families to get ahead. It also means more revenue for Government on the back of higher company tax receipts and higher personal income tax receipts. it also means lower payments on welfare.
As the Treasurer has indicated, over the last five years, our efforts to control expenditure, our efforts to build a stronger economy, an economy which creates more jobs, combined with our efforts to get spending on a more sustainable foundation and trajectory for the future has led us into the position we are in today. This is certainly not the time to change direction.
This is now the second Final Budget Outcome which is better than the forecast at Budget time. In 2016-17 we delivered a $4 billion improvement in terms of our underlying cash balance in the Final Budget Outcome compared to the Budget forecast. This year a $19.3 billion improvement.
Compare that with Labor's last two years in Government, including when Mr Bowen was the outgoing Treasurer in the Labor Government in 2013. 2012-13 the Final Budget Outcome was more than $20 billion worse in terms of the size of the deficit than what was forecast at Budget time and just in three months between Labor's last Budget in May 2013 and the Pre-Election Economic and Fiscal Outlook just before the 2013 Election, the Budget position for 2013-14 deteriorated by $12 billion.
That was a deteriorating trajectory that we inherited moving forward. So Final Budget Outcome 2017-18, more revenue on the back of stronger growth, stronger employment growth, lower payments than anticipated, including lower welfare payments because one of the significant beneficial outcomes for Australians when more jobs are created is that fewer Australians rely on welfare and that is what the figures here today demonstrate.
So thank you very much, Treasurer. It is always good to deliver a Final Budget Outcome that is better than what was anticipated at Budget time.
So does this outcome increase the likelihood that you will return to surplus sooner than predicted?
We look, are still on track to come back to balance in 2019-20. That is the most recent forecasts and as you know, the next forecasts will be updated in MYEFO - that's what normally happens, which is scheduled for the end of the year, after the December National Accounts.
And do you continue to adhere to the budget discipline that all new spending must be accompanied by savings in an equal amount?
We absolutely continue to have a very disciplined approach when it comes to our Budget management and as the Finance Minister made clear, we have got real spending growth down to its lowest level in 50 years.
That's as a result of hard decisions that the Government, when Mathias has been Finance Minister and Scott Morrison has been Treasurer and indeed before him, decisions that had been taken over the course of our Government.
But every year we reconcile the numbers in the Mid-Year Economic and Fiscal Outlook which will be done at the end of the year.
I might just say, looking back, we inherited spending growth from Labor of about four per cent in real terms, that is above inflation. Looking back, we reduced that to 1.9 per cent on average per annum.
Looking forward, if you look at our most recent Budget, the 2018-19 Budget, we are forecasting for that to come down even further to 1.6 per cent on average per annum. So we have a clear track record of paying for all spending increases on comparatively higher priorities with spending reductions in other parts of the Budget.
Obviously, the Budget forecasts get updated twice a year, at Budget and at the half-yearly Budget update in December. The fiscal strategy remains, our fiscal strategy, but the next update of all of the movements up and down on the spending and the revenue side of the Budget, as a result of parameter variations or decisions will be in the half-yearly Budget update.
Just as a forecasting exercise, you're out by 45 per cent on the $18.2 billion deficit you published in May of this year. That's a wild variation in just 6 weeks. Should Treasury be doing better than that for accuracy?
Well, it is actually a big improvement and it's a function of stronger receipts and lower payments and that's as a result of a strong economy.
We are seeing more people in jobs than ever before, and that is more senior Australians, more women, more younger people. In fact, 100,000-plus young people have got a job over the last year, and we are seeing across the economy good growth and in '17-18 that's been reflected in these better numbers.
Let me just make this point, under Labor, in all but one Budget, the variation was to the downside. The Final Budget Outcome was worse than what they anticipated at Budget time.
For us now, two Budgets in a row we are delivering a better than anticipated Budget outcome and that is because our Budget assumptions are credible, they are appropriately prudent and it is always better to plan prudently rather than to do it the Labor way.
Labor was spending money that they thought they might get before they collected it and that is the reason why the Budget ended up in such a bad position after six years of Labor. Labor was anticipating blue sky would continue forever and ever and spending money that they had not collected.
The worst example under Labor was the mining tax. They made all sorts of heroic assumptions about how much it would raise. They created significant uncertainty for an important sector in our economy. They spent all the money they thought it would raise and more and then they did not raise any money. We are managing our Budget prudently and in a way that seeks to ensure that the variation is on the upside, rather than on the downside.
Just on the PM's comments about a potential Indigenous recognition day, do you believe that we should have a national Indigenous recognition day, and if so, when should that be?
Well, I strongly believe that Australia Day should not change, and we should be very proud of our heritage, and we should be able to celebrate the contribution of our First Australians, Indigenous people, together with more of our recent past. So they're not mutually exclusive, but I certainly don't support changing the date of Australia Day.
So you don't think we shouldn't have an Indigenous recognition day?
No, what I'm saying is we shouldn't be changing the date of Australia Day, as we've seen from some local councils, who have indicated they no longer want to have citizenship ceremonies on that day because that day is not appropriate.
I do not share that view, and I know I'm at one with the Prime Minister who has made some very strong comments today about that and rightly so.
The important point the Prime Minister made is that celebrating Australia Day and marking the achievements of Indigenous Australians should not be mutually exclusive. We should be able to do both. So I 100 per cent agree with the comments the Treasurer just made and the comments made by the Prime Minister earlier today.
We should continue to celebrate Australia Day on 26 January marking that very important day in our national history, but we should explore what better ways we could mark on a dedicated day the significant achievements of Indigenous Australians.
So would you support it if it was an additional day then?
Well, those issues are to be worked out but the Prime Minister has indicated very clearly that we're not for changing Australia Day, but we also need to mark out a day to properly record the contributions made by our First Australians, and to celebrate their achievements.