It is a key function of the role of treasurer to be optimistic – basically to talk things up, to be positive, to try to build confidence. Morrison also claimed this week in his budget speech: “Above all this is an honest budget.”
Much of his so-called budget strategy was built on the assessment that “The signs of an improving global economy are there to see.”
But are they? Sure, there has been a modest recovery since the GFC, but there are still doubts about its overall sustainability, and individual country experiences are quite variable.
The recently released IMF: World Economic Outlook 2017 suggests no change in the overall world GDP growth rate since their last forecasts in October: 3.4 percent for 2017, and 3.6 percent for 2018. Most noticeably, the forecasts for the US remained unchanged, although the Eurozone was now forecast to grow by 1.6 percent in 2017, up from 1.5 percent in October, but no change for 2018 at 1.6 percent.
Also, some of the emerging confidence coming from rising commodity prices – especially coal, oil and iron ore – has more recently faded as these prices have corrected, and stock markets have come off their previous peaks.
Hardly reason to break out the champagne! Actually, the global economy is perhaps the most unpredictable it’s been in decades, with significant structural economic and geo-political challenges. And then there is Trump!
While Trump may actually deliver his tax cuts and infrastructure projects, with a compromising battle with Congress these would be most likely to only deliver a short-term, but unsustainable, boost.
With such a challenging global environment, and with both our monetary and fiscal capacities very limited if needed to respond to another ‘crisis’, there was an imperative for this budget to deliver genuine budget repair, while initiating a much needed broad-based reform across most areas of public policy.
However, while (like the Curate’s egg) it was ‘good’ in parts –especially for schools and training, and infrastructure, and to a lesser extent health – it was essentially more a pragmatic, political budget that simply kicked the budget repair task further down the road, and offered little reform, or relief to families struggling with the cost of living.
While Morrison has also recently been talking up our economy and its prospects, the budget papers admit that our growth rate this year will fall to around 1.75 percent, from 2.6 percent in 2015-16, but is then suggested to jump up to 2.75 percent, and then 3 percent, in the next two years. It is this strong growth recovery, and predicted strong wages growth, that he uses to ‘assume’ a budget surplus in 2020-21, not surprisingly after the next election.
The prospect of a budget surplus is again left to shimmer on the horizon!
Some of the foreshadowed infrastructure projects could ultimately deliver stronger ‘jobs and growth’ (there’s that slogan again), but although a $75 billion infrastructure program was announced in the budget, it is over 10 years, with little impact in the next four years of the budget period.
Yes, Morrison was ‘honest’, but only up to a point. You might think that the government might have learned from the fact that Turnbull has had the fastest and most significant collapse in poll standing of any leader, mostly because he raised expectations of strong leadership and good government when he seized the leadership from Abbott, but then failed, conspicuously, to deliver.