Don’t spend the surplus

 

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.

Furthermore, the expected surplus of $4.1 billion is 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.

Eugenie Joseph is a senior policy analyst at The Centre for Independent Studies.