The past recession has been unlike any previous ones, but despite this we can expect Tuesday’s budget speech will still be like many of those given in the past six years.
In the 1990s recession and the GFC, the budget story was really about revenue falling through the floor.
In the 1990s revenue went in two years from 24.4% of GDP to 22% of GDP – a 2.2%pt fall, equivalent in today’s terms to around $43bn.
The GFC was even worse – a fall from 25% of GDP to just 21.3% within three years – or having around $74bn a year less revenue to play with.
Those falls coupled with the increases in government spending created the deficits; but this time round revenue is not really an issue.
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Last year the government anticipated a fall similar to the 1990s recession, but the latest government finance figures show the fall has been minimal compared to the massive increase in government spending.
A major reason is that, unlike previous recessions, the job losses this time were much less ongoing than in the past. And a major part of that was the jobkeeper program ensured that job losses were not counted (which was fair enough, as these people were not working, but they were not looking for work either).
Crucially, the jobkeeper payments were also taxed.
Thus Josh Frydenberg on Tuesday has a bit of a different task than previous treasurers who have had to deal with recessions.
He will deliver a record deficit, probably around $180bn for this current financial year, and for 2021-22 probably around $80bn – a massive drop not because of an increase in revenue, but because most of a big pandemic-related expenditure is gone.
And crucially, unless the government waits till May next year, and decide to hold an early budget, this will be the last one before the next election.
So don’t expect language such as Joe Hockey in 2014 when he began his budget speech by saying: “Prosperity isn’t a matter of luck. Prosperity is not a gift. It needs to be earned. So now it is our turn to contribute”.
Frydenberg certainly won’t be repeating Hockey’s suggestion that “the days of borrow and spend must come to an end”.
Most likely he will adopt more of Hockey’s tone in his second budget in 2015 when he tried the more caring line, noting that “as we all know over the past 12 months, Australia has had to deal with its fair share of challenges”.
Perhaps we will see the very election-campaign-directed budget of 2016 when Scott Morrison began by asserting that “it’s not just another budget”, no, “this Budget is an economic plan.”
By 2017 Morrison, now not having to worry about an election had to admit, “many remain frustrated at not getting ahead” and that “Australians have taken second jobs, where they can, so bills can be paid. And it’s been a fair while since most hardworking Australians have had a decent pay rise.”
Guess that 2016 plan hadn’t quite worked (or maybe it had …).
That four years and one election later, the exact same lines could be uttered perhaps goes some way to explaining just how little this Coalition government has been required to do anything.
By 2018 Morrison asserted that “the Australian economy is now pulling out of one of the toughest periods we have faced in generations”.
Well … maybe not.
At least we know Frydenberg won’t be repeating his first budget speech of 2019 which began with the rhetorical flourish that “the Budget is back in the black and Australia is back on track”.
Last year he ended by arguing that “we are a resilient people, a proud nation and we will get through this together”.
I fully expect the speech will be in this spirit, a talk of the need still to live within means; a few words about struggling families and talks of plans and the future … and in a few years some other treasurer will no doubt also be able regurgitate the exact same lines.
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