Surpluses are tools in Budgets, not inherently good, says Australia Institute

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Surpluses are not an inherently good thing but rather a macroeconomic tool, according to a policy panel of the Australia Institute.

One of the headlines out of the Budget handed down on Tuesday was the $4 billion surplus – the first in 15 years.

However, treasurer Jim Chalmers has cautioned that the surplus will be short-lived, with a deficit expected in the next Budget.

Speaking on a panel to unpack the Budget, the Australia Institute’s senior economist Matt Grudnoff pointed out that during times of recession, like in the 1990s and during the GFC, a deficit was necessary to stimulate the economy.

“[During a recession] you’ve got tax revenues collapsing, you’re having to spend more, but that’s the main way that government basically inflates the economy at a time when it desperately needs to grow because you have rapidly rising unemployment,” Grutnoff said.

“A deficit is a tool. Whether you have a surplus or a deficit, that’s just simply a tool to manage the macro economy. It’s not an objective.”

Richard Denniss, executive director at the Australia Institute, added it was “unusual” Australia focuses on having a surplus, given that is not the case in the US or the UK.

Overall, the panel was critical of the amount JobSeeker was being raised and the lack of support for the working poor in May Budget.

In particular, the lack of a well-being focus in light of the stage three tax cuts, which were not in this Budget, was criticised.

With increasing JobSeeker, the panel pointed out there was a moral duty to help disadvantaged people, not simply about avoiding creating inflation.

“I’m 100% in favour of bringing a well-being lens into our budgeting,” Denniss said.

“I think that’s why it’s vanished because the stage three tax cuts, refusing to put a windfall profits tax on the gas industry, refusing to rein in subsidies for fossil fuels and tax conditions.

“All those choices don’t make any sense in a well-being framework, and all the kinds of needs we’ve been talking about – improving access to childcare, making education cheaper for young people would be green ticks as far as the eye could see.”

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