Treasurer Josh Frydenberg may still pull a budget surplus out of his hat
Treasurer Josh Frydenberg says there probably won’t be a surplus in 2019-20, with the coronavirus hitting economies around the world, but National Political Editor John Rolfe wouldn’t rule getting into the positive this financial year. Read why.
Opinion
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Josh Frydenberg will no doubt feel he has got the better of his opposite number Jim Chalmers this week in a somewhat amusing public tussle.
But the Treasurer would be well advised against getting too cocky. He’s on the cusp of a political setback.
After Dr Jim lambasted Frydenberg’s defence of the government’s weakening financial position as having “all the coherence of a Sydney baboon rampage”, the Treasurer struck back.
He used a Dorothy Dixer from his own side during Question Time to take the mickey out of the Member for Rankin’s affection for New Zealand’s “wellbeing budget”, which adds social and environmental measures to hard economic outcomes.
“I’m asked whether there are any alternative approaches” to the government’s plans, the Treasurer said. “I want you to picture this alternative: the Member for Rankin is about to deliver his first wellbeing budget. He walks, barefoot, into the chamber, robes flowing. Incense is burning. Beads in one hand and speech in the other hand.
“Gone are the seats, gone are the benches, and in their place meditation mats for all. The member for Rankin stands up to address the chamber, to announce that his wellbeing tour has gone national. Hugs for all!
“But there’s a warning to every Australian: when the member for Rankin provides them with a hug and a kiss, he’s going to take away their wallets,” Frydenberg said, to guffaws from his side of the House.
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Well the coronavirus could be about to take away the Treasurer’s surplus. And if that happens the joke would be on him.
Last April, before the election, Frydenberg uttered these words in his Budget address to parliament: “Tonight, I am pleased to announce a budget surplus of $7.1 billion — a $55 billion turnaround from the deficit we inherited six years ago.”
It would be the “first surplus in 12 years”.
He also said in 2020-21 there would be a surplus of $11 billion, then one of $17.8 billion followed by another of $9.2 billion.
That’s four budget surpluses.
We have heard such a promise before, from Labor’s Wayne Swan in 2012, in a speech polished by Chalmers who was his then chief of staff.
“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,” Swan said.
Frydenberg and Scott Morrison now say there probably won’t be a surplus in 2019-20.
I find that very surprising. And it will cost them political capital.
Just as they repeated Labor’s mistake of backstabbing prime ministers, they will be repeating the error of promising a surplus then not delivering.
What Frydenberg has going for him that Swan didn’t is the Coalition will probably get two more chances to get into the black before the next election. That is, to produce the first surplus in 13 or 14 years.
I wouldn’t rule out the government getting into the positive this financial year, despite having lowered expectations this week.
Top economist Chris Richardson of Deloitte Access points out the iron ore price is currently still above way above what the budget forecasts are built on.
Treasury has “hid a bit of money up its sleeve,” he said.
It’s more than a bit. Billions and billions will flow to the budget bottom line from higher than anticipated taxes on mining company profits as a result of the elevated iron ore price.
And the falling Aussie dollar will help, too.
If the government shifts some spending into next financial year (I hear it’s already under way in Defence) then Frydenberg may be able to avoid the ignominy Swan suffered, along with the possibility of featuring in a Labor attack ad over broken promises.
Oddly, Dr Jim remains overly focused on trying to prove the economy was “floundering” even before the bushfires and coronavirus.
He would be better off reminding Frydenberg about his announcement of four surpluses last year.
His old boss, Swanny, would certainly enjoy it if he did.
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