Broadly speaking, Jan and Feb show ongoing — but slow — progress towards fiscal repair. It still remains the case that they are falling behind on revenue — revenue to Feb is ~7bn behind the MYEFO forecast. They are running close to target on expenses, so this means that they are ~7bn behind on their MYEFO forecast of a 1.2bn surplus.
I never thought their revenue projections were reasonable, so I’m not surprised to see this. I expect that they’ll fall further behind on revenue over the next few months. If we assume the current rate of softening, you’d think that they’ll be ~11bn behind on revenue for 2012-13, however I suspect that’s going to prove optimistic.
The rolling 12m sums are a guide to how things develop ‘on average’ (the implicit assumption is that the months to come will be like last year). On this basis, revenue is ~354bn, and expenses ~383bn for a 12m deficit of ~29bn.
So why do I think it’ll be a 20bn deficit and not a 30bn deficit? Because i doubt we’ll see the usual end of fiscal year money-shuffling. In prior years, expenditure has jumped in June as payments were pulled forward into the current year — to try to make the following year look better. Not doing so will cut spending in 2012-13 relative to 2011-12.
The growth rates show the current economic slow down very clearly — revenue growth has been slowing since Q1’12, and continues to slow. The revenue line is falling more quickly than the expenditure line, meaning that the monthly improvement in the budget deficit is slowing.
The lack of year-end ‘shuffling’ will lower spending growth further, however the fact that the ALP hasn’t yet passed some of the savings measures in MYEFO calls into question the probability of a reduction in spending in 2012-13 (relative to 2011-12).
On balance, it seems things are a little worse — and that has me edging out my deficit projection ~4bn to ~20bn.