Chasing a budget surplus is a political game that could backfire

All budgets are political, some more so than others, and Wayne Swan's sixth, to be handed down on May 14, will be as political as they get. Especially the focus on the surplus or deficit, something that won't excite economists much but will have much political import.

This budget - probably Swan's swansong given the state of the opinion polls - will have the rare distinction of being handed down after an election was announced, and therefore effectively during an election campaign.

So the focus on its detail will be sharper than ever. Will superannuation concessions be whittled away, will tax rates be tweaked, who benefits and who loses out? But an overriding focus will be on the size of the deficit.

The bigger the deficit, the bigger Swan's failure will be judged. It was supposed to be in surplus this financial year and the next. But the forecast, last May, of underlying cash surpluses of $1.5 billion in 2012-13 and $2 billion in 2013-14 were always seen as long shots.

An update in November revised those forecasts only a touch, but by then most serious observers saw them - particularly 2012-13 - to be a fleeting victory of hope over reality.

So Swan's acknowledgement just before Christmas that the surplus was not going to happen this year was no surprise to economists. It was more of a relief.

Even if the deficit came in at $15 billion in 2012-13, it would still mark the biggest reduction in the federal budget deficit, relative to the size of the economy, over a three-year period since the 1980s.

Back then the economy needed slowing. But it doesn't now - that's why the Reserve Bank has its cash rate at a 50-year low.

The fiscal screws are being tightened, there's no doubt about that. The interesting question is why. Swan has no need to impress investors the way Paul Keating, as treasurer, repeatedly "pulled a rabbit out of a hat" to impress skittish markets with a series of surpluses in the late 1980s.

Financial market economists these days typically express no concern about budget deficits, at least over the short term. They are much more likely to worry about the unwanted drag on growth from attempts to achieve surpluses.

NAB group chief economist Alan Oster is an example.

He recently suggested that both sides of politics had similar approaches to monetary policy.

"And unfortunately [on fiscal policy] I have no idea that they're going to change at all, because they're both trying to out-compete each other on who can get to a [budget] surplus first, which I think is really stupid," he said.

The dogged pursuit of the elusive surplus was never an urgent necessity, at least, not an economic necessity. It's always been political, a testament to the political skills of Opposition Leader Tony Abbott and shadow treasurer Joe Hockey, like a couple of little boys daring another to jump off the garage roof - and succeeding.