Finance Federal Budget Make no mistake, there won’t be a surplus budget

Make no mistake, there won’t be a surplus budget

Treasurer Josh Frydenberg delivers government's MYEFO update.
Treasurer Josh Frydenberg will not hand down a surplus budget in April. Photo: AAP
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I don’t want to be a Christmas party pooper, but Treasurer Josh Frydenberg won’t be handing down a surplus budget on April 2.

He and Prime Minister Scott Morrison can insist they will until they are blue in the face, but they actually won’t.

What Mr Frydenberg will hand down ahead of the likely May election is, like any previous budget – or mid-year budget review, for that matter – a bunch of forecasts.

This might seem like splitting hairs. But who can forget former Labor treasurer Wayne Swan’s infamous declaration on budget night 2012?

“The four years of surpluses I announce tonight are a powerful endorsement of the strength of our economy, resilience of our people, and success of our policies,” Mr Swan boasted.

Much to his and his party’s humiliation, Mr Swan didn’t hand down one surplus – shrinking revenues at the end of the mining boom rapidly put paid.

Fast forward to the dying days of 2018, and shadow assistant treasurer Andrew Leigh is quick to remind voters that the government has also made unfulfilled surplus promises in the past.

“This is a government that came to office in 2013 promising that there would be surpluses in their first year and every year after that,” Dr Leigh told Sky News.

“They haven’t delivered a single surplus and they have doubled net debt.”

Mr Frydenberg handed down his first mid-year review on Monday, boasting a much improved bottom line.

“Getting the budget back to surplus is our first job, paying back Labor’s debt is our next job,” the treasurer said in revealing the mid-year economic and fiscal outlook on Monday.

Mr Frydenberg forecast a deficit of $5.2 billion for 2018-19, a marked improvement on the $14.5 billion deficit predicted at the time of the May budget.

This was the result of a large influx of company tax receipts, aided by strong coal and iron ore exports.

Even if Mr Frydenberg does end up forecasting a budget surplus on April 2, we won’t know the final budget outcome position until late September next year.

By which time, if opinion polls are correct, Mr Frydenberg won’t even be treasurer – and will have joined Mr Morrison, Joe Hockey and Mr Swan as having failed to personally deliver a surplus.

Labor’s Chris Bowen did spend just 83 days as treasurer before the 2013 election, but not really enough time to do much.

He might get another chance on his likely return to the role after the looming election.

Former Liberal treasurer Peter Costello was the last person to hand down a surplus, more than a decade ago.

Former federal treasurer Peter Costello gives a speech.
Peter Costello delivered 10 surplus budgets. Photo: AAP

In fact, Mr Costello, Australia’s longest serving treasurer, delivered 10 surpluses.

Labor, on the other hand, has not produced a surplus since 1990.

Rising company tax receipts has also helped to fatten a well-flagged surplus forecast in the 2019-20 financial year to $4.1 billion, up from the $2.2 billion forecast in May.

Again, we won’t know the outcome of that until September 2020, by which time the political focus will be back on another federal election.

Economist and keen budget watcher Chris Richardson said Australia’s iron ore and coal miners were benefiting from China having to stimulate its slowing economy through construction and infrastructure spending.

“As China slows, that’s actually good for the budget, but that’s not necessarily a sustainable thing,” the Deloitte Access Economics partner told Sky News.

Other economic forecasts in MYEFO again showed fairly optimistic predictions for wage growth, an outlook Treasury has repeatedly got wrong in recent years.

Wages are expected to be growing at annual pace of 3 per cent in 2019-20, rising to 3.5 per cent in the two following financial years.

That would be a big leap from the modest 2.3 per cent growth at present.

However, with the budget in an improving position, the government might dole out further personal tax cuts to disgruntled voters in the April 2 budget, ahead of the election.

Finance Minister Mathias Cormann wouldn’t rule this out.

“It is no secret that we are committed to lower taxes as part of our plan to strengthen the economy, create more jobs and ensure that Australians have the best possible opportunity to get ahead,” he said.

Voters will hope that proves to be more than a forecast.

Colin Brinsden is AAP’s former economics correspondent, based in the Canberra Press Gallery.