A surplus in five years? Tony Abbott's commitment is not very clever
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A surplus in five years? Tony Abbott's commitment is not very clever

How's he going to do it? It's easy for the Prime Minister to say he'll get the budget back on track.

His Treasurer Joe Hockey tried it after Labor's last budget, saying that based on the numbers at the time he and Tony Abbott would "achieve a surplus in our first year in office and a surplus for every year of our first term". They've since discovered that's difficult to do.

Prime Minister Tony Abbott during question time on Tuesday.

Prime Minister Tony Abbott during question time on Tuesday.Credit:Andrew Meares

It's not only because of the Senate, which the Intergenerational Report indicates has knocked back or delayed about half of the government's long-term budget savings.

It's also because of the collapse in commodity prices. They've slid 27 per cent since Labor's last budget, squeezing government income. Much of the slide has taken place since the Coalition took office.

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Reacting to it by cutting government spending further would just depress the economy further.

It's also because several of the neat tricks in Hockey's first budget have proved not to be so neat after all.

Lifting pensions in line with the consumer price index rather than wages sounded innocuous enough when announced, but was shown in projections prepared for the intergenerational report to result in a cut in projected pension rates so dramatic that the government reneged and said it would review it after a few years.

In recent months Hockey has been careful not to specify a date for a return to surplus.

"I have never specified a date because I can't control external forces and I am certainly not going down the path of Wayne Swan who used it as a benchmark for economic success," he said in February.

Avoiding recession and a sharp increase in unemployment are more important benchmarks for economic success.

That's why Abbott's commitment to balance the budget in five years was unwise. He has no way of knowing what's around the corner.

Peter Martin is economics editor of The Age.

Twitter: @1petermartin

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