You know that old proverb: 'You can't have your cake & eat it too'?

If there ever was a statement that seemed lacking in logic, it was that. Ok, I get the concept. It represents two mutually exclusive choices.

But really, what's the point of having the cake if you aren't going to eat it? You can always let it go stale and rancid. Then you can have your cake and you really can't eat it.

After a horror six weeks of scandals, mismanagement, missteps and recriminations, ScoMo and Joshie finally have something to celebrate and are on the cusp of proving that proverb wrong.

Between them, they've got cakes lining up to the horizon, multiple birthdays and combined Christmases all coming at once.

And when the federal budget is brought down next month, they'll have the knife poised to start slicing.

In case it's passed everyone by, what with the economic and political mayhem of the past year, we are in the final leg of the political cycle. There's an election looming sometime in the next 12 months.

And what better way to try to tilt the odds back in your favour than through a good ole cash splash. It's not like it's never been done before.

What deficit?

Hang on. A cash splash? Isn't the budget deeply in the red because of the pandemic relief?

That's true. But it's all a matter of relativities.

The Coalition has presided over close to a decade of deficits, despite the promise in 2012 of delivering surpluses each and every year of its first term in government.

Those ongoing deficits have caused our debt, while still conservative compared to most other nations, to blow out enormously since 2013.

But while this year's deficit will be the worst by far, it won't be anywhere near as bad as expected. And it is the expectations that count.

Just before Christmas, when the Treasurer brought down his mid-year update and forecasts, there'd already been a huge improvement from the pandemic-delayed 2020/21 budget.

Since then, the turnaround has been even more spectacular. Even in December, the month the MYEFO forecasts were released, it would appear the budget position ended $10 billion better than expected.

According to UBS economist George Tharenou, by the end of January, the deficit was $15 billion lower than forecast and $23 billion less by the end of February - how good is that !!

"If we assume the momentum continues for the remaining four months of 20/21, the budget deficit will be $54 billion smaller than expected at MYEFO," he wrote in a note to clients last week.

Mr Tharenou points out that even if momentum slows, or if the Treasurer takes a more conservative approach next month, the improvement may not be quite so large.

But, which ever way you slice it, it will be much lower than the $198 billion deficit we were expecting at Christmas.

How has this happened?

Dumb luck or good management? It's a combination of the two.

The dumb luck comes from our exposure to China and our position as the world's biggest supplier of iron ore. The good management has been our response at a state and federal level to the global health crisis.

For years now, the federal government wisely has maintained a pessimistic outlook for resource prices. When it comes to iron ore, it has long assumed that booms come and go, and it's best to budget on a weak price.

Acting on the premise that it's always best to under-promise and over-deliver, on a worst case scenario, you can still deliver and you appear prudent. But if things really heat up, you can always claim it's down to sound management and you look to be a genius.

Like previous years, last year's budget pencilled in a $US55-a-tonne price for iron ore. Since then, however, it has soared as high as $US170 and currently is sitting around $US160.

While it doesn't get an instant kick from iron ore prices, since the Abbott government junked the mining tax, it does get a boost from the big lift in corporate tax as mining company profits surge.

That's on the revenue side.

On the expenses side, our rapid recovery from the pandemic induced recession has meant the government is spending less than it previously thought would be necessary.

Unemployment has dropped sharply in recent months.

At 5.8%t, it is way below even the Reserve Bank forecasts. That means less outlay on social security. Bear in mind, Jobseeker payments now have been cut and Jobkeeper has been canned.

What a difference a year makes. This time last year, we were told that lockdowns and a tough approach to health would kill the economy — that we had to choose between the two.

Instead, that tough approach – a complete lockdown at a national level by the federal government and state border closures at any sign of an outbreak – has put Australia as the poster child for how best to deal with a pandemic.

Barrels filled with pork

Economic management hasn't quite grabbed the limelight of late.

The headlines have been dominated by the goings on at Parliament House; misogyny, allegations of sexual assault, nation-wide angry protest marches and hurried Cabinet reshuffles, some of which haven't exactly inspired confidence.

There has been unrest over the management and funding of aged care. And even when it comes to management of the pandemic, the vaccine rollout has started to cop criticism.

Governing with the slimmest of majorities, what might a betting person reasonably expect the upcoming budget to contain?

Women's rights clearly will be a focus, and not just in the Parliament. Given the Coalition abhors red tape, and the idea of quotas, throwing money at the idea might be an easier solution, particularly if some of that cash permeates through the corporate world.

Aged care also is likely to be on the receiving end of some largesse. It is an area that clearly demands attention, following revelations in the recent Royal Commission, and greater government oversight and involvement.

Then there's the evergreen.

Job creation schemes, maybe something for first home buyers and of course, the old faithful: tax cuts and business investment incentives.

The improved budget position has delivered some electoral wriggle room.

The Coalition can still cling to its claim of excellence in matters financial by delivering a much better-than-expected result. And it can dole out some cake for the masses to consume.

Let the good times roll !

Story By | Ian Verrender