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Coalition halves deficit, but not everyone is happy

This morning, Josh Frydenberg announced that he has halved the budget deficit, promising a surplus in the next financial year. Not everyone is convinced.

 

 

Well, it’s official. Josh Frydenberg will deliver the first federal budget surplus in more than a decade. While the surplus won’t officially arrive until the next financial year, the deficit for this year has reduced from $14.5 billion to a mere $5.2 billion.

 

 

How did we get here? There are a couple of factors: The Coalition’s lower than expected spending and a boost from the resource sector.

The commodity market (particularly iron and coal) easily outran the forecasts made back in May (authored by the then-treasurer, Scott Morrison). Lesser factors include steady growth and low employment, garnering Frydenberg’s mob the smallest deficit in half a decade back in October.

 

 

 

The question, of course, is can this pace be maintained?

There are two weapons in Frydenberg’s arsenal: Population growth (which is up), and “bracket creep”. The latter is ostensibly when wages increase with inflation, pushing people into a higher tax bracket. From there, the government claims more tax, with the raising of tax thresholds the usual route taken.

The budget boost would have been much bigger were it not for more than A$9 billion in “decisions taken but not announced”, almost all of which are revenue decisions (presumably tax cuts), with Kieran Gilbert musing:

 

 

All of this walks hand in hand with the economy. If that were to dip, today’s gains would quickly evaporate. For example, if Sydney and Melbourne’s housing market slump continues, things may not be so rosy. But for the time being, it’s a rather palatable win for the Coalition.

 

 

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