This afternoon, on his 4BC Drive program, former Queensland Government Transport Minister Scott Emerson and I shared our astonishment regarding the Morrison Government’s Go for Growth, Keynesian federal budget which Treasurer Josh Frydenberg handed down last night. You can listen to our conversation via this link:
Former PM John Howard and former Treasurer Peter Costello, responsible for ten Australian Government budget surpluses, must also be astonished that a Liberal Government would deliver a budget that no Labor Government ever could, because it would be pilloried all across Australia for its fiscal profligacy. This is another Nixon-goes-to-China-type Budget.
I remember clearly, largely because it made things difficult for some of us in Treasury, how then Opposition Leader Malcolm Turnbull and his colleagues opposed the Rudd Government’s proposed increase in the debt limit to $200 billion in February 2009 following the release of the Nation Building and Jobs Plan, the second stimulus package during the GFC. To some of us, this seemed akin to blocking supply, something which has been considered forbidden since the contentious dismissal of the Whitlam Government in 1975. But Turnbull could at least argue he was standing up for principles of sound public finance. From now on, it will be extremely difficult for the conservative side of politics to criticise Labor for debt and deficits. This could be very costly to the conservatives’ political appeal in future years.
Finally, the Treasury’s medium-term budget projections (pages 97-98) suggest a baked-in structural federal deficit of at least 1 percent of GDP out to which a future Government will need to address, particularly if and when interest rates escalate in the future and the interest bill weighs heavily on the budget. The pandemic will continue to cost us long after it’s over.
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