Economy

Fast Lane: Whatever happened to the budget emergency?

Cara Waters /

Warning! Australia was in a “budget emergency” and Tony Abbott said the situation was critical due to an “almost invisible surplus”.

And so the medicine was dished out last year in the Abbott government’s first budget in the form of harsh cuts targeting both the poor and social services.

The problem was these cuts turned out to be too much for the electorate and the Senate, so the 2014 budget has to go down as one of the all-time stinkers due to its complete implementation failure.

This “emergency” budget then contributed to a slow-down in the economy by scaring the Australian electorate so much they closed their purse strings.

But now as the government fronts up to deliver the budget for 2015 all talk of a budget emergency seems to have melted away.

Instead what is being promised is a “dull and routine” budget.

So that must mean Australia’s finances are in much better shape after a few years of Coalition government, right?

Wrong.

Deloitte estimated last week Treasurer Joe Hockey will reveal an underlying budget deficit of $45.9 billion for the 2014-15 financial year, putting the budget bottom line as $5.5 billion worse off than projected this time last year.

Deloitte estimates the underlying cash deficit will be “stuck” at $45.3 billion for the 2015-16 financial year, which it says “looks like it has been written by Stephen King and painted by Edvard Munch” according to Deloitte economist Chris Richardson.

The Abbott government has already admitted it has abandoned its search for budget savings in this year’s budget and will not meet its forecast return to surplus in 2018.

But strangely enough nobody seems to be worried about this anymore.

Sure there’s been a bit of noise from economists like Shane Oliver at AMP who told me while it’s “not essential” that the budget return to surplus by 2018 or by a particular date, it does need to be headed in the right direction. 

But even SmartCompany’s readers don’t see reducing the deficit as the priority it once was.

In this year’s pre-budget reader survey, bringing the budget back to surplus ranked below a host of other priorities including reducing red tape, cutting the company tax rate, increased spending on infrastructure and greater flexibility in workplace relations.

A budget emergency didn’t help the government sell last year’s budget, so we can only wait and see whether the government’s less alarmist approach this year will help pass the 2015 budget.

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Cara Waters

Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times' website and worked for The Sunday Times in London.

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