The federal government's MYEFO report has downgraded the economic growth forecast for 2015-16 from 2.75 per cent to 2.5 per cent, reflecting the economy’s ongoing transition to a services-based economy.
The 2015-16 Mid-Year Economic and Fiscal Outlook (MYEFO) released by Treasurer Scott Morrison and Finance Minister Mathias Cormann on Tuesday revealed that real GDP growth is likely to come in at 2.5 per cent for 2015-16 – down from 2.75 as predicted in the budget.
Mr Morrison recognised that real GDP growth is “weaker than forecast” but contended that the broader drivers of economic activity “appear to be underway”.
The MYEFO reported that real GDP will likely pick up in 2016‑17, hitting 2.75 per cent.
“With business investment intentions in the non-mining sectors of the economy yet to strengthen, real GDP growth is forecast to pick up more gradually than anticipated at budget,” said Mr Morrison.
The MYEFO also forecasts a blow-out in net debt – likely to peak at 18.5 per cent of GDP in 2017-18. However, the underlying cash deficit is expected to narrow from $37.4 billion or 2.3 per cent of GDP in 2015-16 to $14.2 billion, 0.7 per cent of GDP, in 2018-19.
Moreover, unemployment is likely to peak at a lower level than previously forecast, sitting at approximately six per cent in the June quarters of 2016 and 2017.
Mr Morrison emphasised the importance of “investment” and “innovation” to ensure the Australian economy continues to perform.
“Building on Australia's economic growth record requires sound government finances, continued investment in Australia's productive capacity and policy settings that support the innovation and drive of Australian workers and businesses,” he said.
Mr Morrison also referenced the significance of recent free trade agreements with China, Japan, Korea and the Trans-Pacific Partnership (TPP). He said these agreements will “open-up” new trade opportunities for Australia in the growing Asian region.
“The trade and investment guaranteed by the government's trade deals with regional partners will support growth, job creation and income for Australia,” he said.
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