Budget bleeding, but it has a beating heart

Views from around the world. These opinions are not necessarily shared by Stuff newspapers.

Treasurer Josh Frydenberg has handed down a federal budget with a heart that offers important help for Australia’s most vulnerable, but it has dodged the bigger question of what to do about the huge debts Australia has accumulated during the pandemic.

This is a political budget – but it’s not a big-spending, vote-buying budget. The new measures in it are modest, perhaps too modest in some areas. They offer the minimum needed to satisfy the expectations for social reform that the government has aroused in the past few years.

Mr Frydenberg has made the right call – for now. The recovery from the pandemic has started well, but it is still far too early to pull away the prop of budget support from the economy. Yet his retreat from the traditional strategy of balancing the budget over the cycle must not signal the end of all fiscal discipline. The current budget offers only a very weak framework for managing the deficit, proposing net debt will stabilise as a share of gross domestic product at 40.9 per cent by June 2025. In practice, that means it will increase by a third before it starts to fall.

Debt at those levels is still sustainable, but it is approaching the danger zone. The federal government will eventually have to find ways of either restraining spending or raising more revenue. Neither major party is likely to admit this at the coming election, but voters must demand they offer a plan for keeping debt under control.