The Prime Minister announced the government’s plan to slacken its 2015 deficit target from 3.0% of GDP to 3.2%. While it is an easier target, it is still a cut from the expected 3.5% last year. I think we can relax it further but the revision is in line with my sentiment although not fully. There are several measures which I disagree, especially after the PM mentioned the phrase “import substitution” but I will not go into that.
The budget revision involves a number of expenditure cuts and other, I guess, less orthodox measures.
But what if there was no cut to expenditure?
I have made a simple calculation showing how the deficit ratio would react based on changes in the NGDP and government revenue. The original 2015 budget had the NGDP growing at 9% while revenue increasing at 4.5% from 2014, as I have highlighted in yellow below.
I suppose I could add a range of expenditure cuts too, but a 3-dimensional table or chart makes my head spins without the proper software at hand.
Also, I think it is good to use those figures and compare it with historical ones, just for the context:
