The government has announced that the next Budget will deliver a surplus: the first in more than a decade. And unlike the “four years of surpluses” Wayne Swan announced in 2012, there is a fair chance the Budget will actually end up in the black for either financial year 2019/20 or 2020/21.
Fair due should be given to the government for turning the fiscal ship around, even if most of the hard work was done by the currents of higher tax revenues rather than the engine of spending discipline.
Yet such a victory may well prove to be hollow. The government faces the electorate in May, and at the moment the signs are pointing to a decisive loss. The government may not actually have a single day in office with the Budget in surplus.
And we can presume from their 2016 election manifesto, that Labor intends to spend up big if they take office. Costings of the 2016 policies suggested Labor would push the Budget further into deficit in the short term, though they predicted in the longer term that additional tax revenue would offset the upfront spending.
Putting aside internal issues within the government — even though these are significant — if Labor is elected, they will claim a mandate for higher taxes and higher spending, having promised to do so for two elections now.
What then can we say has been learned from our decade long descent into deficit? The honest answer seems to be: precious little.
No progress has been achieved in shifting the public’s cognitive dissonance over taxes and spending. Evidence suggests that many people remain woefully ignorant of how much we spend on various government programs or even whether spending is growing or shrinking.
Politicians are still promising to spend money upfront in the expectation of future revenue flows. There is no question this has led to inaction on Budget repair, which has consistently but erroneously been predicted to occur on its own.
Perhaps worst of all, there is even less appreciation now of the limits of government intervention than there was in 2007. That we have received so few benefits from the expenditure of so much money has not even dented public faith in the infallibility of government ‘investment.’
The government may have won the battle to deliver a surplus, but they haven’t won over the hearts and minds on budget repair.
15 February 2019 | Ideas@TheCentre
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