More than ego at stake in contest over who owns this year’s surplus

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The blame game over the budget deficit is about to make way for a battle for bragging rights over the surplus – and Jim Chalmers is not giving an inch over who gets the glory.

The treasurer had a quick response on Monday morning when told of the claim by shadow treasurer Angus Taylor that anyone could deliver a surplus this year.

Shadow treasurer Angus Taylor and Treasurer Jim Chalmers. This is just the start of a pivotal contest over who owns this year’s surplus.Credit: Alex Ellinghausen

“They are demanding of us something that they weren’t able to achieve in office in nine attempts,” Chalmers told ABC Radio National of the Coalition’s years in office.

“They went zero for nine when it came to this. So if they really think anyone could do it, why couldn’t they do it?”

This is just the start of a pivotal contest over who owns this year’s surplus – and there is more than political ego at stake. The debate goes to the heart of the competing claims over which party can be trusted to manage the economy.

The previous treasurer, Josh Frydenberg, will claim that this surplus is the dividend from his time in office alongside Scott Morrison as prime minister.

Chalmers has his rebuttal ready. He says Labor made the call to save the big surge in tax revenue over the past year, in contrast to the Coalition when it spent similar gains in the past.

A single policy decision proves this point. The surplus of roughly $4 billion this year is smaller than the tax offset the Coalition created several years ago for about 10 million taxpayers. This tax benefit, called the low and middle-income tax offset, would have sacrificed at least $11 billion in revenue this year if it had been continued. There would be no surplus.

Chalmers and the expenditure review committee of federal cabinet, chaired by Anthony Albanese as prime minister, decided the offset cost too much and had to end. This masthead reported this just before Easter. Opposition Leader Peter Dutton went on the attack.

“They slipped through this tricky move where they abolish this tax offset,” Dutton told Brisbane radio station 4BC, complaining about the money households would lose.

This raises the obvious question: What would the Coalition do? Continue the tax offset, or post a surplus?

The fact is that policy decisions are fundamental to this surplus. While much of the tax revenue flowing into federal coffers is outside the control of any treasurer, thanks to the peaks and troughs in coal and gas export prices, a big call in an expenditure review committee meeting can make a crucial difference.

This surplus is proof that Labor made those big calls. Provided, of course, this forecast survives until June 30.

Frydenberg came within a whisker of a surplus. The deficit for 2019 was just $690 million. That could have been a surplus if the Coalition had been willing to give up a tax cut or halt some of its grant programs. To be fair to Frydenberg, his budget was broadly in balance. Then the coronavirus pandemic came.

Fate was against Frydenberg in the same way it cruelled Wayne Swan’s fortunes when he forecast four surpluses as treasurer in 2012 and then saw them washed away by the global financial crisis.

The ultimate truth about budget decisions is found in the reconciliation table of budget paper one. This table in the Coalition’s final budget, in March last year, shows the previous government could have done much more to set up a surplus this year.

The Coalition once forecast a $99.3 billion deficit for this year. Like Labor, it gained a huge boost in tax revenue and revised that forecast. But it also made policy decisions in its last budget that spent $17.2 billion. It revised the deficit forecast to $78 billion but might have done better.

In other words, it spent a lot of the gains. And if it could do it then, who can say whether it would have done the same after the election?

Whatever Taylor and the Coalition might claim, they will only be able to point to a theoretical rather than an actual surplus from their side of politics. And in the battle for bragging rights over the budget, hypotheticals do not count.

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.

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