Leading economist says there’s no need to return the budget to surplus by 2012/13

One of Australia’s leading economists says there is no economic imperative to return the budget to surplus by 2012/13.

The Labor Government has constantly pledged it will have a surplus in the budget it hands down on May 8, after huge political pressure has been applied by the Opposition for a surplus.

Bank of America Merrill Lynch Australia chief economist Saul Eslake says the “accounting chicanery” being done to produce a surplus in 2012/13 is a “bit silly”.

“To me what it underscores is that the objective of having a budget surplus by 2012/13 is more of a political objective… than it is an absolute dictate of economic management,” he told ABC Television.

It would be only the underlying budget balance, described by Eslake as an “artificial construct that was invented by Peter Costello” – that would be in surplus.

Paul Bloxham HSBC Global Research chief economist says it is important for the Government to head on a credible path towards a surplus.

“But to rush toward one by 2012/13 is purely political in its purpose. Non-mining parts of the economy are tracking at below trend and it’s the non-mining parts that will suffer the most from any cuts,” Bloxham says.

“It is perhaps unnecessary to achieve a surplus over such a short timeframe.”