1 / 49

The 2006 national budget in a macro-economic context

The 2006 national budget in a macro-economic context. Jac Laubscher Group Economist 7 March 2006. In a nutshell. “The fiscal stance offsets the impact of the commodity price cycle and robust consumption spending on the current account deficit”. - Budget Review 2006. Agenda.

davidjessica
Download Presentation

The 2006 national budget in a macro-economic context

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The 2006 national budget in a macro-economic context Jac Laubscher Group Economist 7 March 2006

  2. In a nutshell • “The fiscal stance offsets the impact of the commodity price cycle and robust consumption spending on the current account deficit”. - Budget Review 2006

  3. Agenda • A remarkable year… • …but policymakers are changing their tune… • …because not everything is fine… • …and it is time to manage the risks carefully… • …requiring an anti-cyclical fiscal policy…

  4. Agenda • A remarkable year…

  5. Credit ratings upgraded

  6. Agenda • A remarkable year… • …but policymakers are changing their tune…

  7. Policymakers changing their tune… “Our recent growth although welcome has been unbalanced and based on strong commodity prices, strong capital inflows and strong domestic consumer demand, which has increased imports and strengthened the currency way beyond desirable levels”. - Deputy-president Phumzile Mlambo-Ngquka, 6 February 2006

  8. Policymakers changing their tune… “Commodity prices may stay high for another year, perhaps several years, but one day they will retreat”. - Minister of Finance, Trevor Manuel, 15 February 2006

  9. Policymakers changing their tune… “…we cannot assume that global circumstances will always work in our favour. As has happened several times in the past decade, financial flows could swing away from emerging markets, and these enormous shifts in global money cannot be predicted”. - Minister of Finance, Trevor Manuel, 15 February 2006

  10. Agenda • A remarkable year… • …but policymakers are changing their tune… • …because not everything is fine…

  11. Household savings rate lowest since 1952

  12. Household debt highest ever

  13. National savings rate lowest since 1949

  14. Agenda • A remarkable year… • …but policymakers are changing their tune… • …because not everything is fine… • …and it is time to manage the risks carefully…

  15. Composition of capital flow to SA

  16. Emerging market spread vs. fed funds rate

  17. Current account balances

  18. JSE vs. emerging markets

  19. The fundamental question… • What part of the boom conditions can be attributed to structural improvement and therefore be expected to hold? • What part is due to a strong cyclical upswing that is bound to turn around one day?

  20. Agenda • A remarkable year… • …but policymakers are changing their tune… • …because not everything is fine… • …and it is time to manage the risks carefully… • …requiring an anti-cyclical fiscal policy…

  21. Policymakers changing their tune… “Our task, as government, as households, as the business sector, is to turn the opportunities before us into lasting progress, to translate the resource gains of an economic upswing into real investment in productive capacity. To moderate our consumption tendency, to broaden and diversify economic activity”. - Minister of Finance, Trevor Manuel, 15 February 2006

  22. Change in fiscal stance • Revenue overrun largely sterilised, enabling currency intervention • Government expenditure as budgeted in MTBPS (deliberate or because of lack of capacity?) • Real growth in government expenditure to slow down • Deficit, borrowing requirement and debt ratios reduced, supporting investment spending by other institutions

  23. Change in fiscal stance • Budgeted revenue for 2006/07 probably again underestimated, deficit overestimated • Tax relief skewed towards households, favouring lower income groups • Marginal relief for SME’s • Withdrawal of RSC levies welcome • Halving of tax on retirement funds welcome

  24. Change in fiscal stance • Budget still expansionary, but less so • Ample room created for future expansionary policy if needed • Proper debate on company tax regime required • Increasing tax burden needs consideration • Government dissaving taking too long to address

  25. Policymakers change their tune… “Two particular frontiers loom large in the period ahead: the challenge of investment, and the challenge of skills”. - Minister of Finance, Trevor Manuel, 15 February 2006

  26. The infrastructure challenge • In past twelve years… • GDP increased 47% (if ASGI successful, another 70% in next ten years) • 4,5 million new vehicles were put on our roads • international trade increased 90%

  27. Thank you

More Related