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University of Pretoria
DISCUSSION OF THE NATIONAL BUDGET (2011/12)
11 March 2011 Prof NJ Schoeman

Department of Economics

Content
1. Macro economic performance
a) b) c) a) b) a) b) 1. 2. Macro objectives The Business cycle The revenue base Revenue trends Composition of Revenue Total expenditure trends Budget priorities Budget deficit Cyclically adjusted budget

2. Revenue

3. Expenditure

4. Financing of the budget

Policy objectives – New Growth Path
1. 2. 3. 4. 5. 6. 7. 8. High quality basic education Improved health and life expectancy Greater public protection and safety More rapid employment creation and inclusive growth Skilled and capable work force Food security Environmental protection Accountable government

Macro performance

•The economy moved into a recession by the end of 2008 but is now recovering

Macro performance continued
Deviation from output gap
6 5 4 3

Percentage

2 1 0 -1 -2 -3 -4

•Deviations from potential trend vary between positive 5% and negative 3,3% using an HP filter

Year

The impact of the business cycle on the revenue base

Revenue fluctuates with growth in nominal GDP but is more volatile – see 2009/10

Revenue

•Personal income tax contributes more than 30% of total revenue followed by domestic taxes such as VAT and excise. •Company tax contribution is on the decline as from 2006/07

Revenue continued
Revenue Collected
900,000 800,000 700,000

Millions of rand

600,000 500,000 400,000 300,000 200,000 100,000 -

Tax on international trade Domestic taxes on goods and services Tax on corporate income Persons and individuals

Revenue, especially from taxes on income and profits increased exponentially since 1999/00 with a dip after 2008/09

Expenditure
Composition of Consolidated Government Expenditure 2011/12
General public services including state debt cost 14% Economic services and infrastructure 13% Other 2%

Education 19%

Major portion of expenditure flows...
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