Included in the budget will be news that the 2018-19 deficit will be revised down from $20 billion to under $10 billion and in 2019-20, a surplus will be forecast. Importantly, the 2020-21 surplus, currently estimated to be around $10 billion, could be revised as high as $15 billion or even more on the basis of no policy change as the company tax and other revenue floods in.
It is at this point where politics will likely trump economics.
After more than a decade of continuous budget deficits, which will have totalled close to $400 billion, economic policy conservatism would argue for the government to lock in decent sized surpluses for at least to few years before offering to blow the windfall gain. Surpluses, albeit only moderate ones, would allow the level of debt to be trimmed and with that, government debt interest payments could be reduced in what looks like an environment of rising global interest rates.
With the government trailing badly in the polls and the Federal election scheduled for the next year or so, there seems little chance this conservatism being followed. It is more likely that on budget night, Mr Morrison will hand down a budget that will be designed to win votes with the proverbial offering of a fist full of dollars. Get set for a budget night which includes announcements of income tax cuts and spending targeted to a range of marginal seats.
The message will be “we are delivering a budget surplus and giving tax cuts”.
For some, it will no doubt sound impressive.
It is likely to see the government claw back some electoral support, at least in the short term. It will be interesting to see whether the policy ‘sugar hit’ will works on enough members of the electorate who have heard it all before.
Or whether, even they do actually want to see larges surpluses and cuts to government debt, rather than what will be just a few dollars more in their pay packets.