So strong is Australia's emerging recovery analysts now believe Treasurer Wayne Swan may be on track to bring down a Budget surplus next year instead of in 2015 as officially forecast.
The dramatic turnaround identified by a range of forecasters who have spoken to the Herald flows from projected big gains in export prices, resurgent company profits and a jobs market which against expectations has piled on 200,000 extra jobs in the past six months.
"We are going to have a very, very strong budget position relative to what we saw just six months ago," said ANZ chief economist Warren Hogan.
"We haven't done the final numbers yet, but we are thinking the deficit to be announced in this year's budget could be as low as $30 billion. Next year we could be something close to a balanced budget."
The budget brought down by Treasurer Swan in May in the midst of the financial crisis projected a $57 billion deficit for 2010-11... The November budget update revised that down to $47 billion. Both had the budget remaining in deficit until 2015-16.
But Australian export prices are climbing far faster than officially forecast. Just last week BHP secured a 55 per cent increase in coking coal prices from Japan as well as quarterly pricing, meaning the prices will be renegotiated every three months instead of being set for a year as in the past. The world's biggest iron ore producer, Brazil's Vale has announced that it too plans to scrap annual negations and is pushing for a 90 per cent increase.
RBS Australia chief economist Kieran Davies says if the increase spreads to other grades of coal "on coal alone" it will lead to an $18 billion jump in national income, adding 1.4 per cent to GDP.
"It's bigger than Christmas," said Access Economics director Chris Richardson. "A year from now as we look back it will become clear that the commodity price increases now under way were the biggest single thing driving the economy. The baton will have passed from government stimuls to to China's stimulus and Australian company profits."
"It's not only profits for companies such as BHP but for Harvey Norman and the Banks. Part of it is the strong exchange rate which will make it easier for punters to spend money. High profits for retailers will show up as even higher employment helping retailers more."
"It is also the share market. As it lifts Australians will be keener to borrow and that will help banks."
"It's going to deliver a truckload of revenue to the tax man. It won't happen straight away, it will be somewhat evident in 2010-11 and quite evident in 2011-12. If the high prices last we will be in surplus in 2012-13 for sure."
"Politicians of both sides will be let off the hook. They won't need to take a hard look at the quality of spending and take hard decisions."
Investment bank Goldman Sachs JBWere has told its clients to expect an economic growth rate as high as 3.75 per cent both this year and the next. "We are looking for unemployment to be 4.9 per cent by the end of this year, but the Treasury are still looking for it to be 6.75 per cent," the note says.
"It looks as if we could see a budget surplus some time in 2012. Investors from offshore who buy Australia right now will be winners. The rest will come in later after the government makes its big upgrades. "
The Commonwealth Bank is predicting a return to surplus in 2013-14 when it says net government debt will peak at around $100 billion, less than half the $203 billion forecast in the May Budget.
As for the words painted on the side of the Coalition's debt truck... ===>
Published in today's SMH and Age
. The Budget. Where were we?
. Could our mining boom last another 10 years, another 20?
. The Coalition Debt Truck: Running on empty