Budget balance: A Budget surplus – waiting for Godot?
Treasurer Josh Frydenberg’s delivery from the despatch box announced the first budget surplus since the GFC. Next year there is expected to be a $7 billion surplus and $11 billion the year after. But you may be excused for feeling a little bit like you are waiting for Godot.
That is because there is so much fanfare about budget forecasts and every Treasurer since Wayne Swan has predicted a return to surplus. Meanwhile, actual budget outcomes are largely underreported.
Getting the budget in shape is a worthy goal. But governments run deficits to push the economy along when it needs some help. Once again, all eyes will be on what actually eventuates, not what our politicians promise.
Not to worry about government debt
By global standards Australian government debt is relatively low. Carrying little debt left us in great shape during the GFC and with our run of 28 years without a recession likely to end, having low government debt is important.
But while government debt levels are relatively low they are not what they used to be: a decade of budget deficits, superannuation liabilities and huge infrastructure projects have seen to that.
The financial markets don’t seem too concerned, however, reflecting their comfort with our overall debt position.
This time around, there was no pre-election spending splurge in the budget. Rather, spending was concentrated on infrastructure, with modest increases for health and education.
One surprise was the National Disability Insurance Scheme, where the government saved through underspending. Another surprise was the line item on spending on interest on public debt – despite a low interest rate environment. This is due to a decade of budget deficits.
A heartening trend is that governments of both persuasions seem to be tempering wasteful spending after much more public scrutiny about how well money is spent.
Lower to middle income earners were the big winners in the budget with a tax cut now. But high-income earners will need to wait until 2025 to get their chunk of change from the tax man.
The tax cuts will be a welcome relief for retailers who will benefit from more disposable income.
Small business also got a boost with the instant asset tax write off growing from $25,000 to $30,000 and made available to firms with up to $10 million in turnover.
Overall we can say that the picture for the economy remains much the same as it has for the last few months: steady progress, with low interest rates, low unemployment and plenty of opportunities for businesses to thrive.