Treasurer Scott Morrison has told the government not spend the coming windfall in iron ore and coal prices, saying that if it did, that it would repeat the mistakes of prime minister John Howard and Peter Costello in the 2000s.
This statement is said as economic growth figures show the strongest rebound in a decade.
Australia’s real gross domestic product soared 1.1 per cent in the December quarter after slipping 0.5 per cent in the September quarter. Over the year to December, it grew 2.4 per cent, up from 1.8 per cent, and close to the Treasury forecast.
More importantly for the budget, the nominal measure of GDP, which takes account of higher cash incomes from high export prices, climbed 3 per cent in the quarter and 6.1 per cent over the year. The terms of trade surged 9.1 per cent in the quarter, the most since 2010.
Analysis by the Treasury found that a sustained jump of 10 per cent in the terms of trade would boost the tax take by between $2 billion and $5 billion per year.
Reserve Bank figures released showed commodity prices had climbed 60 per cent since January 2016, and by 36 per cent in the last six months.
While some of the extra revenue would take a while to flow through to taxable profits because of the “rain shadow” of earlier losses, the budget should start looking better in 2017-18 and look a lot better by 2020-21, depending on the assumptions that were made about how long the high minerals prices would last.