A rip-roaring economy could prompt a bigger cash splash by the federal government, prompting speculation more tax cuts for households could be put on the table during the inbound election year.
Latest figures from National Australia Bank's monthly business survey has unveiled the economy continued to improve during November, with conditions and confidence edging higher despite uncertainties arising from the emerging Omicron strain.
Both NAB's confidence and condition indices settled at 12 points which is an easing from October's peak that was driven by the end of lockdown in the south-east of the country.
Improvements were largely driven by better trading conditions and greater employment.
NAB chief economist Alan Oster told The Canberra Times he believes the figures point to an ongoing growth agenda fuelled by spending beyond lockdowns, with the nation's biggest business bank anticipating the mid-year economic fiscal outlook on Thursday will unveil the economy would have recovered from the Delta lockdown.
Mr Oster said the MYEFO update is likely to reveal an annualised nominal gross domestic product figure in excess of 6 per cent, which would provide the Commonwealth with a bigger pool of cash to support the recovery.
"They are going to have a nominal change in GDP in year average terms around 6 per cent," he said.
"That's going to give them lots of money to spend."
Mr Oster suggested the additional funds could be used by the government to alleviate the cost of living, possibly through another extension of the low to middle income tax offset.
Treasurer Josh Frydenberg also commented that both the NAB and ANZ's most recent survey pointed to a stronger rebound underpinned by growing spending.
"ANZ's latest survey on consumer confidence increased 0.5 per cent on domestic borders reopening, while NAB's latest survey shows business conditions continued to lift in November with Australia out of lockdown, driven by strong increases in the retail and transport sectors, and finance, property and business," Mr Frydenberg said.
"We are working to a clear fiscal strategy to drive down unemployment to historically low levels. This has seen Australia avoid a scarring of the labour market so reminiscent of Australia's previous recessions in the 1980s and 90s."
Mr Oster did note the emergence of new variants were an ongoing uncertainty to the recovery, but believed high level vaccination rates would bring an end to further state border restrictions.
The bank expects GDP in the 2022-23 fiscal year to grow by around 4 per cent, with wage inflation likely to occur once unemployment in the labour market tightens to below 4 per cent.
According to NAB's survey the biggest improvements were felt in Queensland and South Australia.
It also flagged there is still scope for recovery in recreation and personal services which were still operating in negative operating conditions.
The capacity utilisation rate rose to 83.2 per cent, while forward orders index over the month of November remained very high at 14 points.
"Notwithstanding the possibility of new disruptions related to the Omicron variant, the economy is well placed to carry this momentum forward over coming months and into 2022," Mr Oster said.
"Forward indicators are also very strong with a rise in capital expenditure a welcome sign that businesses are beginning to look towards a period of expansion."
MYEFO will provide the Commonwealth's most updated growth growth and any revisions to the fiscal numbers over the year, which will reflect the financial cost from the Delta outbreak.
Westpac economists believe the impact of Delta will deteriorate the budget position by 10.4 billion from its initial estimate of $106.6 billion set in May.
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