@Hindog
https://www.abc.net.au/news/2019-05-20/federal-election-the-morrison-government-big-economic-challenge/11128098Morgan Stanley's strategy team argues the current plan is a like applying the handbrake when you're trying to accelerate.
"Running higher surpluses represents a greater near term fiscal drag on the economy, with the medium-term benefit that it reduces government debt faster, " Morgan Stanley's Chris Read argued.
"However, with the economy growing below trend, downside risks elevated and with government debt low relative to international peers the surplus focus ... may need to be reassessed should economic conditions worsen."
This may well be the first big test of Prime Minister Scott Morrison's conviction that his party are superior drivers of the economy, grabbing hold of the wheel and steering away from the fast approaching ditch.
Rate cut
However, the Reserve Bank has one tool to try and fix things more immediately.
After a week where both wages and unemployment data disappointed, the market slashed the odds of an interest rate cut at the next RBA meeting.
There's now a better than 80 per cent chance of a cut early in June, according to the professional money market punters.
An official rate cut is not a vote of confidence in how the economy is going, nor its future.
It is the RBA saying things are getting worse, the economy is slowing, unemployment is rising and we only have one thing we can do.
Whether the RBA can repair things by itself, particularly as rates head down toward zero, is also open to question.
The banks at best would pass on 80 per cent of any official cut, in reality they are likely to be far less generous.
Any cut would then help the 30 per cent of households with a mortgage or those planning to borrow.
Even then, many wouldn't choose to adjust their repayments in line with a cut, and consumption would not necessarily be boosted that much.
For debt-free retirees, and those dependent on interest based investments,a cut or two wouldn't be welcomed.
Is more needed?
The RBA's concern, and its reluctance to cut before now, is largely based on worries about firing up the asset bubble otherwise known as the property market.
It believes the property bubble is deflating in an orderly manner and will eventually get the record household debt-to-income level down to manageable levels that don't risk the nation's financial stability.
A 50 or 75 basis point cut, along with the removal of the threat of capital gains tax and negative gearing reforms proposed by Labor, may well be all the inspiration investors need to jump back into the market and jack up house prices again.
If that's the case, first home buyers may find themselves more stretched with debt, even with the Liberal's pre-election sweetenerto have tax-payers secure their deposit taken into account.
There is also an assumption the banks, having steadily throttled back on riskier lending over the past couple of years (at the behest of regulators and the bank royal commission), will suddenly start lending to all and sundry again.
No doubt, the banks will feel a bit happier they've dodged not so much a bullet, but a flesh wound with Labor's $640 million "Banking Fairness Fund" consigned to the dustbin of failed election policies, but the lending they will do is at the non-risky end of the spectrum.
So with the economy slowing, monetary policy getting close to being exhausted and little in the way of tax cut stimulus available in the short-term, there seems to be only a couple of choices left to get the economy up to speed again.
Mr Morrison can hope things will sort themselves out, although he doesn't have the luxury of blaming the mob before him if things turn really sour.
He could prove his mettle as an economic manager, temporarily forget about the surplus and prime the fiscal fuel pump, or then again he could always rely on one more of his "miracles" to get the job done.
