Wow. Under Scott Morrison’s inspired leadership, the budget is almost back to surplus and the economy is ticking over nicely. And having brought home the bacon, Santa ScoMo can deliver our reward, scattering little presents from now until the election.
It’s a lovely thought, but the truth is less heroic. An old saying would assess the position outlined in the midyear budget update as: good things come to those who wait. Or, franker: better late than never.
To be boasting about how much better the budget balance is looking is a bit rich, coming from a government that, five long years ago, talked its way into government by claiming we faced a "budget emergency" of debt and deficit that only the Liberals could fix because they had good economic management in their DNA.
After the disastrous political reception to its first budget in 2014, the government made no further serious attempt to reduce the budget deficit, instead quietly resolving to wait until the passage of time caused the economy to strengthen and tax collections to recover.
That’s where it finds itself now. Tax collections have strengthened in the past year or so because heavy infrastructure spending by the state governments and the rollout of the national disability insurance scheme have boosted employment and the number of people paying income tax.
As well, company tax collections are stronger because export prices have recovered a bit, businesses have finally used up their deductions from accumulated losses incurred during the downturn, and because the crackdown on multinational tax avoidance initiated by the previous government is paying off.
Even so, the government’s net public debt has doubled from the $175 billion it inherited in September 2013 to $355 billion this October.
Initially, the government resolved not to cut taxes until the budget was back to significant surplus. Malcolm Turnbull ditched that in his first budget and the government has proposed tax cuts in every budget since.
Had it held the line it could have been back to actual (rather than foreshadowed) surplus today. And it could have shown us a net debt that had already fallen a little, rather than telling us its projections see the debt peaking in June next year.
The first politician to show us a projected return to surplus in the next few years was Julia Gillard in 2010. Since then, the Coalition has had to revise down its own projections countless times. We’ve learnt the hard way not to believe any budget number that’s not an "actual".
The Coalition’s budgetary performance has been ordinary in all respects bar one: over the five years to June 2017, it limited the average real growth in its spending to 1.5 per cent a year.
Very few governments can better that restraint – certainly not the previous Labor government which, despite all the dodgy figures Wayne Swan showed us at the time, ended up with real spending growth averaging 5 per cent a year.
As for Morrison’s claims about how well the economy’s doing, Josh Frydenberg has had to revise down the budget’s forecasts for growth in wages and the economy.
With luck the economy will keep growing reasonably strongly in the coming year or two, but only if it negotiates the housing downturn without mishap and only if wages return to reasonable growth.