The budget is back in balance for the first time in 11 years. With a $690m deficit, the final budget outcome for 2018-19 represents a $13.8bn improvement on that announced in May last year.
The principal driver was a record number of Australians in work, with 300,000 people finding a job, 100,000 more than Treasury forecast. This has the effect of increasing tax receipts and decreasing payments as people move from welfare to work.
Export earnings in the year also were up, led by increases in the volume and price of key commodities such as iron ore, our largest export. The price of iron ore averaged $US72 a tonne in 2018-19; the budget had assumed $US55.
However, with Labor unwilling to give the government any credit for the balanced budget, it would have you believe all the improvement is due to iron ore. It’s not only wrong but fails to recognise Labor enjoyed an iron ore price as high as $US185 a tonne and still could not deliver a surplus.
In Labor’s last three years of government, the price of iron ore averaged $US125 a tonne compared with only $US65 for the past three years of this Coalition government.
In addition to the increase in receipts, payments also were lower than expected, albeit by a smaller amount in this final budget outcome. This includes expenditure for demand-driven programs such as the National Disability Insurance Scheme, which has grown 10-fold in the past three years.
There are 300,000 people on the NDIS, more than 100,000 of whom are receiving support for the first time. The number of providers has grown from 3500 to 21,500 in the same period.
Commonwealth spending on this vitally important program was $8.5bn in 2018-19, more than double the $4bn allocated in the year before. Spending will continue to grow as the number of NDIS participants reaches 500,000 in the next five years. The NDIS is fully funded.
When Labor was in government it too had demanddriven programs such as the NDIS where expenditure was less than expected. In its last budget Labor had a $500m estimate variation for carers and a $400m estimate variation for veterans, something it now conveniently forgets.
It is the role of government to meet the demand that exists in these social programs and manage the finances accordingly. So, just as expenditure was less in the NDIS than expected, it was higher in other demand-driven programs, namely the Pharmaceuticals Benefits Scheme. An additional $700m was allocated in the final budget outcome for the listing on the PBS of new drugs such as Besponsa, which is for the treatment of acute leukaemia.
In contrast, during Labor’s time in government, the listing of drugs on the PBS was deferred until “fiscal circumstances permit”.
The clear benefit of a strong budget position and sound fiscal management is that more money can be spent on the essential services people need and deserve. For example, in the 2018-19 year, commonwealth health funding reached $80bn and school funding $20bn – both record amounts. This was $19bn more for health and $7bn more for schools than was spent in 2012-13, before we came to government.
Getting to this point and delivering a balanced budget has not been easy. It has required reform, restraint and the right economic plan to take Australia forward.
As the Business Council of Australia said yesterday:
“Australians should not underestimate the importance of the progress we have made in clawing our way out of deficit. The Morrison government has steered us out of that mess.”
Josh Frydenberg is the federal Treasurer.