From back in black to simply red – the Covid pandemic completely changed Josh Frydenberg’s tune.
Unveiling his 2019 budget, the treasurer saw modest budget surpluses stretching out over the four years of the forward estimates – starting with $7.1bn to be delivered the following year.
“With the budget returning to surplus, the government is strengthening its focus on paying down debt to reduce the fiscal burden on future generations,” Frydenberg said at the time.
But the coronavirus wrecked all that. As hospitality venues shut their doors and unemployment queues stretched around city blocks, the Morrison government found itself trundling out a series of bigger and bigger stimulus packages over the period of a few weeks.
The $89bn jobkeeper program, which kept many Australians in house and home, would have been enough alone to destroy Frydenberg’s forecast surpluses. But it wasn’t alone – the government also spent billions on a temporary increase to jobkeeper, a $50,000 cash flow boost for small businesses and tax cuts for all but the very biggest companies.
In his 2019 budget, Frydenberg thought the government would spend $516bn in the following year. In last year’s budget, the figure was $670bn – $154bn, or almost 30%, more than expected.
Revenue also fell, if not as dramatically. With hospitality crippled and bricks and mortar retail shut down for long periods, especially in Victoria, corporate tax payments fell off – although some of the difference was made up by increased payments from minerals companies, which have experienced bumper profits due to the soaring iron ore price.
The government expected $534bn in revenue in the coming year when Frydenberg rose to deliver the 2019 budget. But by the time the 2020 budget rolled around, that figure had been slashed by $62bn, to $472bn.
Outlooks are now rosier than they were during the depths of the crisis.
In the 2020 budget, the coming year’s deficit was expected to hit $213bn. It’s now come in at a far more modest $161bn.
But that’s still a long way away – across a sea of red – from the $11bn surplus Frydenberg predicted back in 2019.
