Budget memo to Treasurer Josh Frydenberg bank the extra revenue, match or better Labor tax cuts, restore schools and hospitals funding.

After six years of Liberal Government, the budget to be handed down six weeks before a Federal election is going to be a rather desperate throw of the dice attempt to change the political conversation, as opposed to a blueprint for reform, fiscal repair or growth. This will be a political document from a desperate government, not worth the paper its written on. If the government acted in the national interest, wed see it adhering to its own fiscal rules, make tough decisions to rebuild fiscal buffers while economic circumstances allow, all the while creating the fiscal space to fund important public investments. What we will get is a document focused on the Governments immediate political survival that disregards fiscal discipline and fails to put in place a plan for the future.

The expected Budget improvements will be despite Scott Morrison and Josh Frydenberg not because of them. An inconvenient truth for the Treasurer who likes to talk about Labors tax policies more than his own is the revenue to GDP ratio has gone up a full two percentage points since 2013, mainly off the back of PAYG tax receipts. This is the reason for return to surplus. The recent Deloitte Budget Monitor summed up Australias current situation - the economy is getting worse, but the budget is getting better. Our national income is rising on the back of resurgent terms of trade, but Australias external situation is masking weakness in the real economy. Recent national accounts show weve had two consecutive negative quarters of GDP per capita economic growth, the weakest consumption growth in more than six years, stalling productivity and ongoing anaemic wages growth. For a government seeking re-election for a strong economy, this is a pretty damning indictment.

But pushing aside the failures on the economy, there are three tests for the Government in next weeks budget. One, the Government needs to bank any positive uptick in revenue from more favourable international economic conditions and start paying down Australias record half a trillion dollars of debt, consistent with its own fiscal strategy. Two, it needs to match or better Labors bigger and better tax cuts for 10 million low and middle income Australians. And three, it needs to restore the cuts to schools and hospitals weve seen under this Government, including restoring funding for early childhood education.

The International Monetary Fund has rightly been arguing for some time that strengthening fiscal buffers in an environment of high debt burdens is an imperative. We agree. Even the Governments own fiscal strategy commits that the overall impact of shifts in receipts and payments due to changes in the economy will be banked as an improvement to the budget bottom line, if this impact is positive. Consistent with their actions at the last MYEFO where the Government spent more than half the $31 billion uplift in Budget improvements, were likely to see more of the same disregard for fiscal discipline.

The Government will also want to turn peoples attention to their new round of tax cuts. It wasnt too long ago that Scott Morrison as Treasurer was telling us that we needed a $44 billion hike in the Medicare Levy to fund the NDIS. The problem for the Government is that even when it comes to tax cuts the Government is playing catch up. Labor currently has bigger, better and fairer income tax cuts for 10 million Australians earning under $125,000 than the liberals, tax cuts that will see a teacher earning $65,000 receive around $928 a year in tax relief. This is part of Labors economic strategy to put more money into the pockets of people that spend more of their income, supporting consumption and economic growth. If the Budget doesnt match or better Labors offering for low and middle income earners, it will have failed at the first hurdle.

The Government will desperately try and argue its delivering record investments in education and skills. But nothing can hide the fact theyve cut $14 billion from public schools, $3 billion from skills and training and there are 150,000 less apprenticeships since the Abbott-Turnbull-Morrison Government came to power. Most disturbingly, Scott Morrison and Josh Frydenberg have also failed to commit to extend preschool funding for four year olds beyond this school year, which stands in stark contrast to Labors fully funded commitment to see that both 3 and 4 year olds get access to subsidised preschool. If the Government fails to match Labors commitment to give all 3 and 4 year olds in Australia access to 15 hours of subsidised early childhood education, it will again demonstrate the governments lack of ambition with it comes to lifting the nations human capital.

With the revenue flowing into this years Budget, Scott Morrison and the Liberals have simply run out of excuses for their Budget mismanagement and record and growing debt. Labor hasnt relied on a wish and a prayer that international circumstances and the more favourable terms of trade; weve made the big calls which are necessary to put the budget back on to a stronger structural footing, delivering bigger budget surpluses than the government. Well also deliver better tax cuts to 10 million working Australians and make generational investments in human capital. When it comes to the competing plans for the budget and economy at the next election, Labor has the better one.

This opinion piece was first published in The Australian Financial Review on Friday, 29 March 2019.