Economist Chris Richardson says the welcome return to balance in Australia’s budget position is more to do with luck than any “tricky decisions” taken by the federal government.
Treasurer Josh Frydenberg announced on Thursday the final budget outcome for 2018/19 was $690 million deficit, the best outcome in 11 years.
A surplus is forecast for this financial year.
Mr Richardson, a partner at Deloitte Access Economics and self-proclaimed “biggest budget nerd” in Australia, said national income and the budget have benefited from stimulus measures taken in a slowing Chinese economy which have demanded coal and iron ore, Australia’s biggest exports.
“The lucky country got lucky again,” Mr Richardson told the Committee for Economic Development of Australia’s State of the Nation conference in Canberra on Friday.
“It’s back to balance, not because Canberra took tricky decisions and certainly not because Canberra did many reforms, but because we got lucky.”
However, he said the slowdown in economic growth is a challenge.
He said interest rate cuts, tax cuts, a weak dollar and the housing market having reached a floor will be enough to keep the Australian economy “muddling through”.
However, to reach the Reserve Bank’s target of an unemployment rate of 4.5 per cent would mean the addition of 200,000 jobs, which would require a three percentage point cut in the cash rate when it is already at one per cent.
He said while the risks and uncertainties are on the rise, he is “not uncomfortable” where fiscal policy is at the moment.
The Reserve Bank, Labor and others have urged the government to do more in the face of the ‘slowest growth’.
However, Mr Richardson does want to see an increase in Newstart, saying while it would cost the budget $3 billion, assisting people back into work would see higher tax revenue.
The government is adamant that it is doing enough to keep the economy growing.
Finance Minister Mathias Cormann said the government delivered a pro-growth budget in April.
“Getting the budget back into surplus is critically important to ensure the funding for essential services are on a sustainable foundation trajectory for the future,” he told ABC television.
“It’s also important to keep the Australian economy strong.”