Federal Budget 2016: Turn back the deficits should be Scott Morrison’s mantra

With NASA-like precision, the Treasury website is counting down the days, hours, minutes and seconds to the launch of Scott Morrison’s first budget on Tuesday week.

Treasury should also have a clock that counts the days since a Treasurer last delivered a surplus. Today such a clock would reach a scary eight years, 11 months and 17 days.

The last time a Treasurer delivered a surplus, Morrison was not even in the parliament. It was Peter Costello who left the nation $19.7 billion in the black and produced 10 surplus budgets in 12 years.

Despite Kevin Rudd’s vow to be an economic conservative, Labor’s response to the global financial crisis was to spend to avoid a recession and to allow a “temporary” deficit. Wayne Swan repeatedly promised a return to surplus but the record shows six deficits worth $27bn, $54.5bn, $47.5bn, $43.4bn, $18.8bn and $48.5bn, for a total of almost $240bn of red ink.

Tony Abbott and Joe Hockey campaigned on fixing the debt and deficit emergency but their first budget was a deficit of $37.9bn and the second, which Malcolm Turnbull and Morrison will complete, is so far estimated to be a matching $37.4bn.

Consider just the present financial year. Next week we will get the 10th official prediction for the 2015-16 budget bottom line. Over the past four years, four different treasurers have all looked for ways to tell us the state of the budget has become bleaker and bleaker.

The first prediction for 2015-16 came on budget night May 2012 when Swan famously opened his speech boasting about “the four years of surpluses I announce tonight”.

His original forecast was for a surplus of $7.5bn. Within six months he’d shaved off $1.1bn and by the next budget — his Swansong — he was hanging onto a wafer-thin surplus of $800 million while his other predictions for the surplus he’d never deliver were blown away.

It was left to Chris Bowen who in his 72 days as treasurer ended the pretence, saying the 2015-16 year was on track for a deficit of $4.7bn as a result of bigger than ­expected revenue writedowns and a gloomy unemployment forecast.

When Hockey took control, he loaded up the budget with money for the Reserve Bank and other measures that he said showed the true deficit was now $24.1bn.

Hockey predicted an improvement to a $17.1bn deficit when he handed down his poorly received first budget but the savings he hoped for did not pass the Senate and with further revenue writedowns in the budget update he lifted the deficit estimate to $31.2bn.

In last year’s budget, Hockey estimated the deficit for 2015-16 would be $35.1bn and in the update last Christmas, with Morrison now in charge, we were told it had deteriorated to $37.4bn.

From Swan’s original prediction, the budget bottom line for 2015-16 collapsed by almost $45bn. From Hockey’s first budget to his second, the deficit doubled.

It is on track to be the sixth highest budget deficit of all time. That’s hardly the surplus Swan predicted would be delivered “come hell or high water” or the repair Hockey promised after years of ridiculing Swan. Voters who like spending but not cuts are as much to blame as the Senate that won’t help and governments that promise what they can’t pay for.

The nation’s leading budget watcher, Chris Richardson from Deloitte Access Economics, says a good way to understand the budget is to picture a series of treasurers playing Bill Murray’s lead role in the 1993 movie Groundhog Day.

“For the better part of a decade, the treasurer of the day woke up and China delivered a stunning revenue dividend. The PM of the day then promptly parcelled much of that out as new spending, and the treasurer packaged up the rest as tax cuts, before going to bed amid the sound of applause,” he says.

“Then came the sequel, in which the treasurer of the day woke up and China delivered a huge revenue writedown. The PM of the day then panicked, the treasurer tried to wind back the spending surge of the previous decade, but the Senate blocked the cuts, before the treasurer went to bed amid the sound of jeers.”

In his early weeks as Treasurer, Morrison called himself the “spending cop” but as The Australian’s economics editor David Uren revealed last week, since Turnbull seized power 223 days ago, he has made more than $10bn worth of fresh spending. Next week’s budget will have to pay for that before it can fund any new promises for the election that is now 68 days away.

There must be a greater urgency about tackling the deficit trajectory yet neither Turnbull nor Bill Shorten have made a return to surplus a priority or set a target.

Any revenue the government raises it wants to repackage as tax cuts so it can keep a pledge to have overall lower taxes. It is hoping to have a smaller deficit paid for by spending restraint and fuelled by economic growth.

Labor says it has $100bn in savings, mostly from tax rises, but it will give the bulk to increased spending. If the revenue predictions fall short (think of the $47.7bn over a decade it hopes to get from higher tobacco tax) you can bet it will be deficit repair that suffers, not the spending promises.

Last week, Reserve Bank governor Glenn Stevens warned of the need to brace for trend economic growth being lower. It is yet another flashing light the politicians ignore at their peril. Growth is not going to be enough to fix the deficit. Spending restraint is important but may also not be enough.

It is a hard equation for the Treasurer. His first budget must be economically responsible yet politically popular because the Prime Minister has locked himself into a July 2 election and is relying on the budget as the springboard for the campaign to lift the stocks of a government that is behind in the polls.

If Morrison really wants this budget to show Australia can live within its means, as we stumble towards the ninth year of the “temporary deficit”, he must show a credible path to a believable surplus and a plan to tackle the debt mountain.

Morrison stopped the boats. Can he stop the deficits?