1. When the actual budget outcome improved relative to the expected budget outcome, such as was the case over 2023-24, it enables the government to be less constrained when handing out the budget for the next year. This means that the government is more likely to increase expenditure relative to revenue, knowing that the impact on the budget outcome and net government debt will be less than what was expected prior to unexpected windfall gains.

Growth in real GDP of 1.0% was lower than the forecast rate of growth in real GDP of 1.5%. In itself, this suggests that growth in tax revenue will fall relative to government expenditure, inflating the budget deficit.  However, government revenue and expenditure a more directly related to nominal values.  [See nominal GDP below]

Growth in nominal GDP of 4.4% exceeded the expected rate of growth in nominal GDP of 1.25%.  This occurred primarily because the terms of trade/commodity prices were higher than anticipated (i.e. the government overestimated the decline in commodity prices when they actually rose for a period during 2023-24), which in turn increased government revenues (above the levels expected) as mining companies generated more income from their activities, which then translates into additional company tax revenue for the government. [It also helped to reduce government expenditure to the extent that growth in the mining sector helped to reduce unemployment.]

Employment growth of 2.8% is relatively strong compared to the forecast of 1.0%. It indicates that the number of people in employment grew more than the government expected over the year.  It positively impacts on incomes earned in the economy, which in turn adds to tax revenue and reduces government expenditure on welfare to the extent that unemployment is likely to fall), which contributed to the reduction in the deficit and the return to surplus for 2023-24.

An unemployment rate of 4.1% is lower than the 4.25 forecast.  This should reduce government expenditure, as fewer people will be relying on government income support, as well as raise government revenue to the extent that the lower unemployment rate is consistent with growth in incomes. overall, it contributed further to the reduction in the deficit and the return to surplus for 2023-24.

Growth in the CPI of 3.8% is higher than the 3.25% forecast.  Ordinarily, a higher than expected rate of inflation will initially have a favourable impact on the budget outcome as higher inflation not only contributes to bracket creep (as people move into higher tax brackets), but the higher inflation typically goes hand in hand with growth in economic activity (i.e. demand inflation pressures are present).  In this context, a higher than expected rate of growth in inflation should help to reduce the budget deficit as government revenues increase and government expenditure falls. However, If inflation is caused primarily by cost pressures in the economy (i.e. cost inflation), as was since 2022, then it can actually increase pressure on the deficit (despite the existence of bracket creep) because is contributes to a slow down in the economy and an automatic decrease in revenue and increase in expenditure.

Growth in the WPI of 3.9% is lower than the 4.00% forecast.  This should negatively impact on the size of the deficit as lower wages growth directly feeds into lower growth in individual tax revenue than forecast.

3. This is because, despite the fall in commodity prices/terms of trade since 2022, the period 2023-24 saw a small resurgence which caused national income or GDP rise purely as a consequence of higher prices received for exports. This equates to a rise in nominal GDP relative to real GDP given that real GDP strips out the effect that higher prices have on the real value of production.

4. Growth in nominal GDP of 4.4% exceeded the expected rate of growth in nominal GDP of 1.25%. This occurred primarily because the terms of trade/commodity prices were higher than anticipated (i.e. the government overestimated the decline in commodity prices when they rose for a period during 2023-24).  This caused the total value of production in nominal terms increasing more than expected.

5. Given that the wage price index is a measure of the average wages received by workers, then it means that real wages growth will be negative when growth in the CPI is greater than growth in the WPI. Accordingly, it indicates that the purchasing power for wage earners on average declines which has a negative impact on material living standards.