Key challenges facing budget

KEY CHALLENGES FACING JOE HOCKEY'S SECOND BUDGET

DEFICITS

For a government that boasted in opposition that it is in the DNA of the coalition to deliver surpluses, they are still a long time coming. A surplus is forecast for 2019/20 and two elections away. Voters will quickly tire of the surplus rhetoric if further excuses are made about revenue, when it is supposedly a spending problem.

DEBT

The slogan "Labor's debt and deficit disaster" is also likely to wear thin with government debt expected to balloon to more than half a trillion dollars in 2018/19 and reach a staggering peak of $573 billion by 2025/26. Debt was around $320 billion in 2013/14 when the Abbott government came to power.

SPENDING

After last year's miserly budget, the emphasis this time around is on spending in two key areas - small business and families - with the aim of creating jobs and driving economic growth. The budget's economic forecasts though suggest neither will flourish immediately . Again voters will soon get fed up with the "jobs and growth" slogan if the jobless rate starts ticking up beyond its recent 12-year high of 6.3 per cent.

BUSINESS TAX CUTS

Small businesses should be happy with the $5.5 billion jobs and small business package, although business groups and tax experts have questioned the wisdom of creating a two-tier company tax rate and whether this will just add further complexity to an already complex tax system. The changes are occurring as the government conducts a tax review supposed to simplify the system.

CONFIDENCE

Confidence will be crucial to gauge the success of the budget. Business confidence remains in the doldrums, and while the business package may lift spirits in the short-term, it has to be backed with a rise in consumer confidence, which also has been sluggish. If customers aren't coming through the door, firms are unlikely to consider expansion plans.

PARLIAMENT

Hockey's budget will again come under the scrutiny of a hostile Senate, which is already concerned that additional childcare funding is coming from blocked family benefit cuts from last year's budget. Even the government's coalition partners, The Nationals, are unhappy with the childcare changes.

GOVERNMENT

One of the biggest risks to the budget is internal ructions. Hockey has been under severe pressure since his first budget. The treasurer has been lampooned for his absence in recent weeks and being overshadowed by Social Services Minister Scott Morrison in announcing more acceptable changes to the pension and the childcare measures. Morrison is seen as a future treasurer and prime minister. Internal bickering, should the second budget fall flat on its face, will bring back memories of the Labor years.

ELECTION

A government's first budget is usually when all the hard work is down, the second less so and the third in an election year is when the goodies are handed out. With the budget still in large deficits, it is difficult to see where those goodies will come from unless there is an early election before the next budget.