A no surprises budget

Tonight’s budget contains relatively few surprises.

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The forecasts imply a return to surplus by 2020-21, unchanged from last year and are based on modest expenditure restraint and an expected recovery in revenues. Modest expenditure restraint seems appropriate to the economy’s current circumstances. Forecast recoveries in revenue, in truth, have not been forthcoming in any budget since the GFC and is again a risk to the current forecast. S&P has made the following very short statement: “Our current rating on Australia is ‘AAA/Stable’. We will look through the details of the budget over the coming weeks. As we’ve previously highlighted, improving budget balances remain important to the rating to offset Australia’s high vulnerability to shifts in offshore financial market sentiment.” The comment suggests much may hinge on whether the agency believes the government’s forecasts for improved budget balances over the next four years.