The treasurer, Jim Chalmers, came dangerously close on Friday to spoiling the surprise of a possible one-off surplus on budget night.
For those just tuning in to pre-budget news, the S-word must seem particularly jarring after months and years of chat about “structural challenges”, which is code for “the budget is rooted”.
We know there has been a substantial increase in revenue from previously underestimated commodity prices, lower unemployment and earlier than expected wages growth.
What we don’t know, but senior economists such as Chris Richardson suspect is possible, is that this has been big enough to see the budget back in black.
Asked about the possibility punters may be “disappointed with the cost-of-living relief that is handed down on Tuesday if there is a surplus”, Chalmers told reporters in Canberra that the Albanese government has been “ambitious … but our ambition is built on a foundation of responsible economic management for a reason”.
“Our approach has been vindicated and we will be vindicated on Tuesday night and we will make it clear … what the final budget position is.”
Chalmers clearly meant “vindicated” in the sense that Labor intends to pull off the seemingly impossible task of delivering both: substantial cost-of-living relief, and a budget at or near balance, which won’t add to inflationary pressures.
But just how much vindication should be felt must be judged against the decisions that the government has taken to get here.
While Chalmers promises some elements of the cost-of-living package will not be limited by age we understand the jobseeker base rate will likely be increased only for the over 55s.
Nor will the activity test on childcare subsidies be abolished, despite the the urging of the women’s economic equality taskforce.
So a surplus or budget restraint will be built on the backs of 126,000 Australian children whose parents don’t do enough formal work to qualify for subsidies and 680,000 jobseekers and youth allowance recipients under the age of 55, who may get something in the budget but probably not an ongoing increase in weekly payments.
It will also be built on the backs of low and middle income earners, who no longer receive their tax offset worth $11bn, which was canned in the 2021 budget, and who will have to earn more than $100,000 to be compensated (in fact, overcompensated) by the stage-three tax cuts to take effect next year.
Of course there is a reason to run a surplus or smaller deficit – to help get fiscal policy moving in the same contractionary direction as monetary policy to bring down inflation and prevent a 12th interest rate rise.
But as the Grattan Institute chief executive, Danielle Wood, argued at the National Press Club this week, there are other ways that ambition could be paid for, including cracking down on generous tax breaks for property and superannuation.
The problem is that at the 2022 election Labor promised no changes: not to stage three tax cuts, not to Western Australia’s GST deal, not to property tax and not to super.
The one instance that Labor bent or broke this promise was the shrinking of tax concessions on earnings of super accounts with more than $3m, which voters will have their say on at the next election before it takes effect – too late to take any of the heat out of the economy right now.
The ambition on the spending side is similarly restrained. While it’s clear that responses to entrenched disadvantage are close to Chalmers’ heart, the $200m announced so far seems like a drop in the ocean compared with what’s needed.
Next week is also a test for the Coalition and the Greens.
Peter Dutton will deliver his second budget reply, with the expectation or hope from his MPs that the Coalition will start offering policy solutions to get back in the game after the Aston byelection defeat.
The Greens, whose leader Adam Bandt is casting Albanese Labor as a centre-right party and himself as the real opposition leader, will need to land some blows on the need for welfare to be liveable and universal.
The Greens also face a test in the form of the housing affordability future fund bill, with the possibility Labor will put it to a vote in the Senate, daring the minor party to vote against up to $500m a year for social and affordable housing.
Within the constraints that the Albanese government faces – some external, such as inflation, and others self-imposed – Labor’s first full-year budget since it regained office looks like it may thread the needle.
But the ultimate test for the budget, which Chalmers says will “see people through and set the country up”, will be whether Australians feel adequately supported, or whether a surplus is cold comfort for those who needed more ambition.
