What should we do with the government surplus? - The Centre for Independent Studies

Should we raise Newstart? Pay Aboriginal people some rent for their land? Or bank it? Four people weigh in

John Quiggin, Australian laureate fellow in economics at the University of Queensland

If there is one thing we can learn from the reaction to the Morrison government’s announcement of a projected surplus of $4.1bn for 2019-20, it is that, while everyone loves a surplus, no one loves a big surplus. At least for the last thirty years, the Commonwealth budget has never been in surplus by more than 2% of GDP.

No sooner was the projected surplus announced than pundits of all stripes began describing it as a “war chest” which could be used to fund tax cuts and other election sweeteners.

The pundits have history on their side. The term “war chest” reflected the political practice of the Howard-Costello government. Over the course of an electoral cycle, the budget would move into surplus only to be dissipated in tax cuts and concessions.

That is if the projections aren’t derailed by an economic slowdown or worse, a severe recession. That’s what happened to Paul Keating’s “bringing home the bacon” surplus in 1990, and to the surplus inherited by Labor in 2007. Sadder still are those Treasurers, like Wayne Swan in 2011, who promise a return to surplus only to see it snatched away by economic shocks.

Josh Frydenberg’s promised surplus is a wafer-thin 0.2% of GDP and could be turned to deficit by any of a number of shocks which are already looming as possibilities – a crash in the housing market, a slump in commodity markets or an all out trade war.

The real truth is that, within the limits of its recent variation, the budget surplus or deficit is almost entirely symbolic. The budget decisions that matter relate to the levels of public investment and public services, and to the maintenance of public sector net worth.

Cassandra Goldie, CEO of Australian Council of Social Service

While economic conditions have handed the government a surplus, the prime minister’s plans to squander revenue on personal income tax cuts puts the future of our essential services and social security system at great risk. The government continues to ignore the advice that the highest priority for spending is to lift up the incomes of people who have the very least, plugging the gaping hole in our social security safety net by raising the rate of Newstart to a liveable amount.

The $20bn a year already committed to high-end tax cuts is six times the amount we would need to lift the rate of Newstart by $75 a week. At $40 a day, the current rate of Newstart is trapping people in poverty. It’s near impossible to find a job when you don’t know where your next meal will come from or how long you can keep a roof over your head.

Instead of wasting revenue on tax cuts that disproportionally benefit high and middle income earners, the government should shore up funding for our future, universal health, education, disability and other community services.

A responsible government would restore our social security safety net and guarantee essential services into the future. That means cancelling tax cuts for people earning more than $100,000 a year – not spending billions more on them.

Luke Pearson, founder of IndigenousX

Before we are all blown down by the collective force of a million people simultaneously screaming “the government gives $30bn a year to Aboriginal people each year”, I’d remind you that this figure not only includes mainstream services, funding for non-Indigenous corporate programs, non-Indigenous run services and charities, and even for Nigel Scullion to give money to groups to fight Native Title claims even if they don’t ask for it. So the money they actually “give to Indigenous people” is closer to a minus number than it is to $30bn when you consider the money they make off the lands they never paid for or created a Treaty on.

So in lieu of a Treaty or any other form of agreement providing Australia with the moral authority to exist, or giving the land back, I’d say $4.1bn is a decent first installment.

The other changes I want to see don’t cost money, they save money. Such as Aboriginal control of Aboriginal programs, stop criminalising poverty and actually listen to Indigenous people, scientists, teachers, women, doctors, etc when it comes to policy decisions in relevant portfolios and collect the taxes owed from corporates who don’t pay anything. Backpaying rent is really my only surplus suggestion, well, except to mention that IndigenousX has a Patreon if you’re feeling generous.

Resist the urge for any couch-bouncing about the government’s expected surplus from a boom in company tax receipts.

A surplus is not like extra cash in the piggy bank for splurging on ice-cream.

Rather, it is simply the state of the budget at a point in time. A surplus is not guaranteed to last as tax receipts fluctuate each year, depending on the strength of the economy.

The expected surplus of $4.1bn is also small – in a budget of roughly $500 billion, this is not much larger than a rounding error.

This leaves scant buffer room in the event of an economic downturn, particularly if that impact comes as economic fallout from China, our largest trading partner.

Therefore, treating a single surplus like “spare cash” is unwise. Instead the government should treat it like a responsible household would. Most of us tend to use surplus cash to pay down our credit cards or mortgages, or save it for a rainy day.

For the sake of our children’s future, the government should be similarly prudent.

So don’t get too excited about this surplus. It is not cash for splashing and may prove to be short-lived.