Hurdles Treasurer needs to overcome

POLITICS/ELECTION The Turnbull Government will be pinning its hopes on the Budget to change its fortunes in opinion polls, having continually dragged its heels against Labor since the 2016 election. Malcolm Turnbull will be hoping it will also lift his standing to stave off any challenge to his prime ministership in the party room ahead of the next election. Economists expect the Government will be able to boast a further improvement in the Budget position and keep to the promise of a surplus in 2020-2021. Tax revenue is rolling in, helped by a booming global economy, but measures like personal tax cuts also have to be accounted for in leaner times. The economy has repeatedly failed to live up to its potential, recording its slowest quarterly rate of activity in over a year in the final months of 2017. Economic growth remains restrained by slow household spending in the face of weak wage growth, rising energy prices and high debt. Jobs growth has been the good news story for the economy in the past year and has boosted government revenue. Employment increased by a record 16 months in a row, producing more than 420,000 positions, although growth has come off the boil in recent months. Such strength has drawn more jobseekers into the market, which has slowed the rate of decline in the jobless rate. It has also yet to translate into a pick-up in wage growth. The missing link in the economic outlook, annual wages growth remains around its lowest in at least 20 years at just over 2 per cent, which is affecting household spending. Strong wage growth is a key component in returning the Budget to surplus with Treasury having forecast an annual rate of 3.5 per cent in 2020-2021.