Costello will have extra cash to use

CANBERRA - The Government will upgrade its forecast Budget surplus for this financial year because of booming tax revenues, says the Australian Financial Review.

The higher tax revenues would be revealed in the mid-year economic and fiscal outlook, expected today, the paper said.

The estimate of the underlying cash surplus for the year would be higher than the A$5.3 billion ($5.65 billion) forecast in the pre-election Budget update in September, it said.

This was despite A$8.7 billion worth of Government spending promised during the election campaign, including A$800 million allocated for 2004-2005.

The paper said the higher revenues would come as economic growth forecasts were set to be downgraded through weaker-than-expected growth during the September quarter, higher oil prices, an appreciating Australian dollar, fears about the effects of drought and reduced global momentum.

Treasurer Peter Costello has said election spending would reduce the Budget surplus forecast for the 12 months to June 30, 2006, to A$2.7 billion from A$5.1 billion, while the surplus for 2006-2007 would be cut to A$4.5 billion from A$6.9 billion.

"The upgrade was driven by stronger-than-expected company tax receipts following the strongest corporate profit reporting season for more than a decade, which helped the Australian sharemarket reach the critical 4000 point mark," it said.

The pre-election Budget update left the gross domestic product growth forecast unchanged at 3.5 per cent. But a Reuters survey of 15 economists expected a median forecast of 3 per cent for GDP, and a surplus down to A$3b.

- REUTERS