Everyone knows the big story for Australia today has to be the Barnaby baby balls up story and the fact that he ripped into the Prime Minister while calling his fellow Parliamentarians the “scum of the earth”.
Yep, that will take precedence over a more important story that our beloved budget surplus could show up as early as next year’s Budget!
I know click-bait stories get all of us in, though I have resisted any tale about TV programs involving bachelors, survival in the jungle with cockroaches and anything involving food fights on reality cook shows!
I’m proud of myself for that.
Against the odds, I’m going to try and steer the lonely eyes of a nation to a good news story that most of our shock jock media commentators seemingly lose too much sleep over — the budget deficit and how it loads up our public debt.
In simple economics, if we get the budget into surplus, the debt gets paid off, so it’s a sign that a government is doing the smart and proper thing. Let's face it, if there was no debt (and/or very little debt) all the money used to pay off the interest, for starters, could be used for health, education and infrastructure. These big-ticket items are a sign of a great economy that can deliver for its people the spending that raises both welfare and productivity.
I know it’s not as sexy as Jane and Barnaby and some scintillating story from the reality TV circus, but gee it’s miles more important.
Over the weekend, my old AFR mate, Christopher Joy, gave me exactly that, revealing how quickly the budget deficit is shrinking and how much closer is our first surplus since the time when Peter Costello was Treasurer.
Chris loves to make business and finance stuff complicated (he loves being the smartest guy in any room) so he told us that: “The cumulative net operating deficit (think budget deficit) topped out at $18.8 billion in October last year and now has been whittled down to $8.6 billion!
Better export revenues and less outlays on welfare, linked to that 430,000 jobs created in 2017, have helped our budget bottom line. When I have people whinging about our deficit and debt problems, I just say, “let’s get economic growth and jobs to happen and the deficit will disappear.”
Chris reckons at the next Budget, the Treasurer (whoever that is) could be announcing a surplus in this financial year, a couple of years ahead of schedule!
You might be asking why I’m pondering who will be crowing about this possible surplus, when Scott Morrison is obviously doing a pretty good job. Well that’s because we might have an election before the second Tuesday in May when we do the Budget.
Interestingly, the Turnbull Government can go after May but most pundits tipped it would be before. Of course, that could all change if a surplus is hurtling towards us, meaning that Turnbull and Morrison could go to the next election pointing to the scoreboard asking: “Are you really going to sack the team that has created growth, jobs and a budget surplus?”
Only a country hooked on reality cooking shows, celebrities being embarrassed in the bush and kiss-and-tell stories masquerading as news, could ignore such an important economic development that has serious social implications.
If all this happens and Scott can show his surplus to his doubting critics such as Standard & Poor’s (which can play havoc with a country’s AAA-credit rating), would he be able to make them eat humble pie. But more importantly, the Government would be doing positive stuff for interest rates.
An economically strong government backing the banks is better than a weak, economically profligate one, whose support isn’t worth the paper it’s written on.
And Chris is not the only one seeing this beautiful budget improvement. “The dramatic improvement in Australia's fiscal situation continues,” CommSec chief economist, Craig James, says. “The budget is surprising in a positive way, with the smallest rolling annual deficit in nine years. And that improvement is coming from both sides of the balance sheet.”
This is not only a great feather in the hat for the Treasurer and the Government (though they were helped by a really good prices for our iron ore, coal and LNG), it makes the case for company tax cuts, because they’re more affordable and would be coming in over a damn long time. Back in March, the AFR told us: “The Minerals Council of Australia will release new research today that finds Australia's company tax rate was the fourth highest among developed countries and by 2020 would be the second highest in the OECD. “Canadian tax expert Jack Mintz's report shows that Australia's marginal effective tax rate is 28.4 per cent, higher than the average METR across the G7, G20 and OECD economies and almost 10 points higher than in the US following President Donald Trump's cuts.”
Meanwhile, in the US, retail warehouse giant, Cosco, recently lifted its hourly wage rate to around $18 an hour, which is high by US standards. The company’s management cited the Trump company tax cuts as the main driver of the decision.
I know Barnaby’s baby balls up and other silly stories of life can be great click bait and great for the voyeur in us all. However, this budget surplus coming soon to a country near you is a much more important attraction. It’s a budget blockbuster!