The finance minister says Tuesday’s federal budget won’t be “completely bereft of savings” but he’s confirmed it will be some time before it returns to surplus.
Simon Birmingham said it would be unwise, given all the uncertainties associated with managing the pandemic, for the Morrison government to revisit its anticipatory “back in black” mantra from 2019 anytime soon.
Birmingham, in an interview with Guardian Australia’s political podcast, said the Coalition had a “firm focus” on budget repair up until the coronavirus pandemic hit at the beginning of 2020 and was “cautious” about when the budget would return to surplus.
The strength of Australia’s economic recovery had exceeded early predictions but the finance minister said present uncertainties necessitated caution. “We all have to be cautious about how much we bake in promises dependent on medium and long-term forecasts and projections,” he said. “That is obviously rife with uncertainty.”
Birmingham said in “normal times” voters were inclined to believe forecasts about budget conditions over the next few years “barring extreme global events”. But in the current turbulence, putting a concrete timetable on a return to surplus would not be credible “given the many steps that will have to be made to get back to that point”.
The finance minister said a once-in-a-century pandemic had put the government in a position “where we have to be honest about the uncertainties we face”.
Tuesday night’s budget is expected to contain substantial spending on social services, including aged care and mental health – as well as continued fiscal support for the economy which is still recovering from the first recession in 30 years.
Guardian Australia revealed on Thursday the budget would also contain a top up for the National Disability Insurance Scheme. Scott Morrison said on Thursday the commonwealth’s contribution to the NDIS would increase by $13.2bn between 2020-21 and 2023-24. The minister overseeing the scheme, Linda Reynolds, has warned there are “hard discussions” ahead regarding the sustainability of the current funding model.
Birmingham said it remained important to strive for a return to surplus “at the right time”. He noted Australia went into the pandemic with considerable fiscal firepower, because there was lower debt compared to other countries, and the solid budgetary position gave the government room to pursue policies such as jobkeeper and jobseeker.
The finance minister said the solid budgetary starting point at the opening of Covid-19 “also enables us to come through this recovery period without having to pursue higher taxes that could impede the recovery”.
He signalled the looming budget spend on aged care – which will be the government’s response to the royal commission – would not be funded by new levies or taxes. But the finance minister held out the prospect that new government investments would be accompanied by means testing and some user pays.
“If you look at the aged care system in its current construct, there are already consumer contributions,” Birmingham said.
“People do make contributions towards residential aged care, they do face contributions in certain areas towards home care arrangements. That’s been a key part of the Australian system to date.
“Government support and services operate in an environment of effective means testing, ensuring that we are able to target support to those who need it most, and by targeting in those sorts of ways, that enables us to keep taxes as low as possible.”
Asked whether the budget would contain any substantial savings measures, Birmingham said: “We’ve certainly looked for savings where we can and where it is economically responsible to do so.”
“We are always looking to ensure spending is appropriate and that’s a constant process across every portfolio,” he said.
“We’ve worked pretty hard over a long period of time to ensure there are efficiencies across the public service and across spending programs and we’ll keep reinvesting in terms of finding new ways to achieve that efficiency.”
The government has pre-announced some elements of the budget, including expenditures this week worth more than $2bn. Birmingham said the spending decisions in the budget were predicated on confidence the government could “drive the growth” to fund services in perpetuity.
Birmingham said the deficit would be lower in 2020-21 in part because of the recovery in the labour market, with many Australians transitioning from income support to jobs.
The Coalition in the past has championed its record on economic management as a point of contrast with the Labor opposition. But the pandemic has changed the political conversation around debt and deficits – redrawing some of the traditional battle lines for the next federal election.
Asked whether the Coalition’s base was comfortable with the government’s shape shift from the “budget emergency” rhetoric of the Abbott period to the Keynesian response to the pandemic, Birmingham argued there was still differentiation when it came to spending promises.
“The quality versus the recklessness of spending will remain very much a Coalition versus a Labor proposition,” he said.
