Aust Budget surplus, growth forecasts tipped to narrow in 2003
By Tim Smith
SYDNEY, April 18 AAP - The war in Iraq could halve Australia's Budget surplus for 2002/03to around $1 billion, according to economists.
The surplus for the 2002/03 Budget, to be brought down next month, is expected to besubstantially lower than the federal government's forecast in November.
However, the budget position is still expected to be safely in the black.
In its mid-year economic and fiscal review (MYEFO) in November, the government forecastthe surplus for 2002/03 to be $2.1 billion.
"The rhetoric coming out of Canberra at the moment seems very much that they are goingto keep it in the black," Commonwealth Bank chief economist Michael Blythe said.
"At first glance that seems a bit surprising given some of the spending that has beengoing on on the defence front."
The cost of the war in Iraq is expected to be unveiled in the budget and with ongoingdefence costs, the surplus numbers are likely to be substantially below the November forecast.
"I would expect the government to budget again for a surplus, although I wouldn't besurprised if the surpluses, particularly for the current financial year are lower thanthey had foreshadowed back in November," ANZ chief economist Saul Eslake said.
"It is possible that this year's (2002/03) budget surplus could end up being in theorder of $1 billion and next year's (2003/04) surplus being a little less than $4 billion."
At the same time, economists were expecting forecasts for gross domestic product (GDP)growth for 2003/04 to be shaved by at least 25 basis points.
In the MYEFO, Treasurer Peter Costello forecast economic growth of four per cent for 2003/04.
"I wouldn't be surprised if they shaded down to 3.75 per cent the forecast for growthfor the fiscal year in 2003/04 ... given the downward revisions the IMF (InternationalMonetary Fund) and the OECD (Organisation for Economic Co-operation and Development) havemade to the international economy," Mr Eslake said.
Mr Blythe concurred but also supported comments from Mr Costello that a break in thedrought was necessary to achieve even the moderated growth rate.
"That (four per cent GDP growth in 2003/04) is possibly still achievable but it iscertainly at the high end of the range of possible outcomes," Mr Blythe said.
"A large part of that is on the assumption that the drought actually breaks and weget a big recovery in farm production."
Mr Blythe said a revision back towards 3.5 to 3.75 per cent growth for the 2003/04period would be in line with Commonwealth Bank's forecast of 3.6 per cent for the sameperiod.
Economists also cited education spending, Medicare, the future of the government bondmarket, the further sale of Telstra and the measures that are still being held over fromthe 2002 Budget as other things to watch out for.
AAP tcs/sh/mo/br
KEYWORD: BUDGET03 ECONOMISTS (REPEATING)
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