As has been the case for the last three or four budgets, the Government has faced some very difficult decisions in preparing for tonight's budget. There are so many levers they could, would, or should (or couldn't, wouldn't or shouldn't) "pull" as part of this year's budget, that the mind boggles at the possibilities and the consequences. Whilst each issue comes with its own economic consequences, the high potential for this budget to be more brutally dissected by the media than most, along with the Government's own precarious position in both houses of parliament and the wider electorate, means that the stakes are high. There is no shortage of things for the Treasurer to consider, including:
- when will the promised surplus return? (and is the good debt vs bad debt story really that sellable, both to the electorate and to the financial markets?)
- is infrastructure spending the answer, and if so, how do we ensure that the spending is on "good" (productive) infrastructure projects that live up to the "good" debt tagline?
- how does the government navigate patchy (or perhaps more accurately, fragile) confidence from within the mid-sized business sector upon which our nation's economy relies?
- weakness in employment numbers continues to persist and could be an electoral time bomb.
- energy costs and housing affordability continue to be problems (and energy may get worse), so how can the budget respond to these issues and counteract the frequent "drip" of bad news these issues cause in the press?
- how does the government claw back the seemingly rampant cash economy to ensure that everyone pays their share and boost government coffers?
These are just a few of the economic and political challenges facing the Government. Let's hope the "right" levers are pulled to set up our economy for better times ahead!
While the politics of the budget have changed, the economics have not. Treasurer Scott Morrison has assured us the economy has turned the corner. Yet real wages continue to fall and the slack in the labour market is as bad as it was three years ago.How do we know? The government statistician releases a series called the labour underutilisation rate. It comprises the unemployed, underemployment among those working part time but wanting to work longer hours, and those who have simply given up and left the labour force.At 14.4 per cent, the underutilisation rate is hovering around its highest level this century, including during the Global Financial Crisis and global recession of 2009. Among young people, the underutilisation rate is a staggering 31 per cent. No wonder so many young people despise the political class.