Cheat sheet: What is MYEFO and do I need to care?

I hear you, WTF is a MYEFO?

MYEFO is the mid-financial year release of the federal government’s economic and fiscal outlook. It is an update of the budgetary position.

Basically it highlights the blow-outs from the “main plan”, which is released in budget week in May each year.

Think of it like this… all those sneaky little purchases you made at Gorman a few months ago that you thought would not count but came to bite you on the credit card bill right before Christmas? That is MYEFO for the government.

It takes account of all decisions made since the release of the May budget which affect expenses and revenue and therefore it revises the budget aggregates.

Yesterday the Treasurer announced Australians are on track to inherit a national debt equivalent to $30,000 per person, with the interest bill to pay for it blowing out to $15 billion next year.

Announcing an increase of $2.3 billion in this year’s deficit to $37.5 billion, Treasurer Scott Morrison and Finance Minister Mathias Cormann said, while the budget was still in need of repair, the economy was heading in the right direction.

They said spiralling debt, growing deficits and lower economic growth were to blame for the extra debt.

But DON’T PANIC as we are headed in the right direction, the new Treasurer Scott Morrison has assured the nation.

In fact, in an amusing and captivating analogy he says the whole thing is kind of like going on a family road trip at Christmas.

“As we go into this summer season and Christmas season, many Australians will jump in the car and they’ll head off to their favourite holiday destination,’’ he said.

“They know where they’re going and they know how to get there. There are no shortcuts; there may be some delays on the way with road works or things like this, there will be plenty of people in the back seat … saying ‘Are we there yet? Are we there yet? Are we there yet?’

“That’s natural. But our path back to budget balance is very similar to that. We need to take a very safe and careful route and one that does not put at risk the very important objectives we have on growth and on jobs.”

Thanks Treasurer, that does really help to put it into perspective. Thanks for setting our expectations so low.  We all know the pain of a long drive with small children. Personally I would rather stab myself in the eye with a pencil.

But back to MYEFO and why it is not PERFECTO.

GDP growth predictions since the May budget have been cut from 2.75 per cent this year to 2.5 per cent and the following year from 3.25 per cent to 2.75 per cent.

The budget deficit for this year has blown out $2.3 billion to $37.4 billion since the May budget, with the fiscal imbalance blowing out a further $26 billion over the four- year estimates. A return to surplus has now been put back a year, to 2021.

A total of $34 billion in revenue has been wiped due to the slowdown in China and slump in commodity prices.

There have been spending commitments made of $10.2 billion since the May budget, including $550 million in the next two years to deal with the cost of Labor’s asylum seeker policies.

The Turnbull government has announced savings of $10.6 billion, leaving net savings of $400 million over four years. Savings will also be made with a $2 billion cut in the welfare budget.

A further $4 billion of savings were banked on slowing population growth, which would lead to lower Medicare and social welfare payments.

It is a difficult pill to swallow for the Liberal Government who came to power promising to get rid of the debt and stating there was a “budget emergency” ad nauseam.

The tactic of frightening Australians about a non-existent budget emergency was highly effective in the 2013 federal election campaign. Internal and published polling showed Australians were very concerned about Labor’s ability to rid the country of debt. Debt that Joe Hockey and Tony Abbott continually reminded them would be “passed on to their children.”

But of course then the first Hockey Abbott budget was a disaster – with brutal cuts announced deeper than many Australians could have ever imagined.

They justified the cuts by saying they were essential to get rid of the debt.

However the latest crunching of the numbers shows they have not managed to get rid of the debt at all – in fact it has blown out.

The new Treasurer is now telling us there will be more pain to come – more cuts – but surely this time the government will be much more careful about who they hurt with the slash and burn.

All in all, it will be an interesting six months ahead in the lead up to the next federal budget.

Those in the community campaigning for more funding on issues like foreign aid, domestic violence and childcare will likely be bitterly disappointed.

Budget gain means more pain.

Not just for the public, also for the politicians. The whole situation is one gigantic headache for new the Treasurer and Prime Minister Turnbull.

In politics you must be careful what you wish for.

But more importantly you have to be careful what you promise.