In retrospect, the decision by the Turnbull government to issue a normal Mid Year Economic and Fiscal Outlook rather than use the opportunity of a political reset and a new Treasurer to undertake a mini-budget looks increasingly flawed.

Tomorrow’s MYEFO will show a significant revenue write-down from lower iron ore prices, lower wages growth and lower economic growth projections. Even putting aside Scott Morrison’s weird fiscal denialism in his repeated assertions that Australia “doesn’t have a revenue problem”, there is also the challenge of spending. Morrison has made much of the need to get spending from 26.2% of GDP, the level it reached under Tony Abbott and Joe Hockey, back to the budget forecast for this year of 25.9%.

Hockey took a deliberate decision to continue to pump tens of billions of deficit spending into the economy in the 2014-15 and 2015-16 budgets, and was correct to do so given the tepid economy and unemployment above 6%. But 25.3% of GDP — where spending will still be at in 2018-19 — is too high given an improving economy.

Morrison should be aiming for something closer to the 24.1% of GDP Wayne Swan managed in 2012-13. Regardless of how the tax reform debate plays out and whether Morrison ever snaps out of his “there’s no revenue problem” delusion, the path to surplus lies in a more rapid reduction in spending than the current lazy plan put forward by the government. And the first step on that path should have been tomorrow’s MYEFO.

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW