By Paul Smeaton and Madolline Gourley
Following the announcement of the Federal Budget on Tuesday night, focus is likely to shift to Wayne Swan’s pre-election promise of a surplus.
Mr Swan assured Australians prior to the Labor Government being elected in 2017 that he would deliver a Budget surplus by 2013.
Economists are hopeful Mr Swan can deliver, saying the end of economic stimulus initiatives and the ongoing mining industry boom will help.
However some economists question whether or not a surplus is necessary.
Brian Redican, chief economist for Macquarie Bank says: “It’s very much a political goal for the Government; it really doesn’t matter for the economy whether there’s a small Budget deficit or a small Budget surplus. The Government appears to have taken the opinion that it matters very much politically.”
Mr Redican believes struggling households should expect more financial pain in future budgets.
He says Australians can expect to pay the price of getting the Budget back into surplus with higher taxes.
A surplus for the 2013 financial year would mean a $50 billion turnaround for the Government in two years.
Saul Eslake, former chief economist for the ANZ, now representing the Grattan Institute in Canberra, agrees a Budget surplus is more of a political necessity than an economic one.
“The Government’s insistent that hell or – as we’ve seen in the aftermath of the Queensland floods – high water the Budget return to surplus by this particular year is really more driven by politics than it is by economics.”
Meanwhile, Shadow Treasurer Joey Hockey believes the Government’s Budget will be fundamentally flawed.
“Unless the carbon tax is included in the Budget tonight, the revenue figures for 2012-13 will be wrong, the spenditure figures will be wrong, and the forecast on inflation, on economic growth and employment will be wrong.”