Another Budget, another promised surplus

A Budget here, and a Budget there, Budget, Budget, everywhere a Budget.

Yes Virginia, it's Budget overload, there's wall to wall coverage of the Australian Federal government's 2017/18 Budget - before, during and after - its big reveal on the evening of the 10 May 2017.

The overriding theme of course is that the government's Budget would be in surplus soon (promise!). Let's hear it from Federal Treasurer Scott Morrison's own lips:

"Mr Speaker, tonight I announce a fair and responsible path back to a balanced budget.

"Having exhausted every opportunity to secure savings from our 2014-15 and 2015-16 Budgets, we have decided to reset the Budget by reversing these measures at a cost of $13 billion.

Despite this, I can confirm tonight that the Budget is projected to return to balance in 2020-21 and remain in surplus over the medium term.

The underlying cash balance will improve from a forecast deficit of $29.4 billion in 2017-18 to a projected surplus of $7.4 billion in 2020-21."

This will be achieved through expected higher tax receipts - "as a result of policy decisions including increasing the Medicare levy, introducing a major bank levy, improving the integrity of GST on property transactions and introducing a Skilling Australians Fund levy" - and increased spending mainly on infrastructure (National Rail), Gonski 2.0 and the NDIS.

The combination of which, along with other variables of course, will deliver real GDP growth of 2.75% in FY 2017/18 and 3% in the following year and "from 2019 20 until 2023-24, real GDP is projected to grow faster than potential at 3%."

I won't be surprised if this triggers that feeling of deja vu for the butcher, the baker and the candlestick maker for we've been here before.

Recall Wayne Swan - the country's Treasurer from 2007-2013 - him, who promised a surplus...and kept promising one Budget after Budget. Swan promised a surplus as early as May 2010 and kept at it until his last one, promising a surplus equivalent to 0.1% of GDP by FY 2012-13 that would grow to 0.4% of GDP in FY 2015-16.

All because many of the assumptions contained in the Budget Papers 2012-13 turned out overly optimistic (in hindsight) and some just plainly off the mark - such as: "Growth is expected to be driven by surging resources sector investment and growth in non-rural commodity exports" and "there is expected to be little contribution from...dwelling investment".

And here we are in the year 2017 and that budget surplus has remained ever-so elusive. But we'll have one by FY 2020-21, promise.

The point is that the economy's performance is dependent on many moving parts. It's hard enough to control the domestic economy's behaviour - i.e. the reaction of economic agents - business, consumer, investor and government - of the budget measures themselves. Throw in assumptions for global growth, the progress (or otherwise) of Australia's major trading partners, geopolitical uncertainties (trade war mongering by Trump), commodity prices, exchange rates...and we have a minefield of one, or several, or all going wrong.

As printed in the Budget Papers 2017-18, "The fiscal aggregates in this year's Budget are underpinned by economic forecasts for the Budget year," one major incorrect assumption and that coming surplus could be delayed again (or it could come earlier).

Read more: GDPAustraliaBudget Papers 2012-13Federal Treasurer Scott MorrisonNational RailSkilling Australians FundTrumpWayne
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