Starting points matter

Headlines such as

Joe Hockey says Opposition can’t promise a Budget surplus either

neglect the fact that starting points matter. Clearly if the budget is in deep deficit, and the sovereign debt level / GDP is relatively high, it is much more difficult to achieve a surplus, ceteris paribus.

Since the Coalition doesn’t know if, or when, it might next be in Government, it cannot promise to deliver a surplus for the present financial year – after all it may still be in opposition on 30 June 2013. We don’t know the true state of the budget – there could be hidden contingent liabilities and contractual issues that further undermine the budget.

But we do know this. If we could return to December 2007 and have in place ANY government other than Rudd/Gillard, than 2012-13 would be in surplus. A Barton Government, yes, a surplus. A Hawke Government, yes, a surplus. A Whitlam Government, yes, a surplus. Any competent government that had been in office since December 2007 would have no difficulty in achieving a surplus in 2012-13 when our terms of trade are so high. It takes a remarkably incompetent government to manage a deficit under those circumstances.

The next government will have to deal with the legacy that is Rudd, Gillard and Swan. Unless there is a time machine out there?

About J

J has an economics background and is a part-time consultant
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17 Responses to Starting points matter

  1. jupes

    Joe Hockey says Opposition can’t promise a Budget surplus either

    That was never the point.

    The point was that Labor did promise a surplus. Over 200 fucking times.

    And then never delivered.

  2. Infidel Tiger

    The love media are shameless.

    Swan has crashed the plane and now it’s Hockey’s fault he won’t be able to get it to takeoff when they hand him the keys? Yeah right.

  3. Skuter

    The opposition needs to highlight the public debt interest burden. Telling the population at every opportunity how much they are paying each year will tend to focus the mind and also highlights how much the coalition will have to run just to stand still.

    It takes a remarkably incompetent government to manage a deficit under those circumstances.

    Let alone four of the largest ever.

  4. blogstrop

    It’s what the media do, IT. Without honest media, democracy is stuffed.

  5. Honesty

    Rudd/Gillard government was to balance the budget over the economic cycle. Is it a lie or a failure? Either way that is the issue to be discussed before we go to how to clean up the mess. Lenore Tayor in one day skips the five years of ALP damage and no holding to account to – “even the coalition can’t promise a surplus.” We cant let th Leftsiders get away with this.

  6. Skuter

    Honesty, balance over the cycle was Costello’s goal. Surplus over the cycle was Swan’s. Now compare actual outcomes. Costello got pilloried for supposedly producing a small structural (or cyclically adjusted) budget deficit in 2007-08 (which was an actual surplus). The structural deficits must now be massive. Terms of trade are up, actual budget balances over last few years are much worse. No wonder Treasury don’t talk about that any more.

  7. The next government will have to deal with the legacy that is Rudd, Gillard and Swan.

    There is just so much unnecessary spending in the federal budget that it would not be difficult to get back to surplus, as well as deliver a tax cut, in the first 12 months.

    Abolish the departments of climate change, health and education. Cut off money to the ABC and SBS. Cancel foreign aid. Means test all welfare.

    Yes it will prompt screams but many of them will be short lived as they only have a voice because of government funding. For example, privatising the schools would bring and end to teacher activism; they’d all have to work for their income. Same goes for the ABC.

    Fairfax would still carry a candle for big government, but it’s facing its own Armageddon soon too.

  8. Tracey

    DavidLeyonhjelm said everything I wanted to and probably better than I would have managed in my current mood. The fact that a sizeable portion of the population will still vote for these cretins fills me with utter despair.

  9. H B Bear

    Lucky KRudd was a fiscal conservative otherwise we’d really be in the shit.

    The original Labor lie.

  10. John Barrett

    Predicable cycle.
    Labor wrecks the economy;
    People had enough- toss out Labor;
    LNP fix the economy;
    Everyone complacent, life’s boring, need a change, vote Labor;
    Labor wrecks the economy.
    And on we go. The left-leaning cheer squad, Abbott hating media act like the 3 blind monkeys to the obvious.

  11. John Barrett

    Merry Christmas and Happy New Year to all.

  12. candy

    Mr HOckey not promising surplus is very sensible.
    Australians are sick to death of false promises from politicans.

  13. paul

    Well, maybe not the Whitlam Government.

  14. Honesty

    If there’s one group who should actively support privatisation of the ABC itsvafaifax. It might be viable competing on left propaganda without taxpayer funded free left propaganda. What a dilemma.

  15. Johno

    If there’s one group who should actively support privatisation of the ABC itsvafaifax. It might be viable competing on left propaganda without taxpayer funded free left propaganda. What a dilemma.

    Ideology usually trumps self preservation on the Left. They think there is something fundamentally immoral in looking after yourself, unless there is some ‘greater’ purpose they are pretending to achieve.

  16. OldOzzie

    Johno

    re your comment

    “If there’s one group who should actively support privatisation of the ABC itsvafaifax. It might be viable competing on left propaganda without taxpayer funded free left propaganda. What a dilemma.”

    Nope – it seems Fairfax is going to use ABC Resources gratis from the Australian Taxpayer, so now you are funding Fairfax and ABC by your Tax

    This week, a six-month Fairfax Media investigation – conducted in association with the ABC’s 7.30 Report – has revealed the existence of dozens of suspected corrupt customs officers at Sydney Airport and on the waterfront.

    Read more: http://www.smh.com.au/national/covert-watch-on-customs-20121221-2brov.html#ixzz2FpqcqhuS

  17. Skuter

    In fact can I point out that we would be able to get a surplus this year quite readily by having tax as a share of GDP anywhere near the level of the previous Coalition government, the highest taxing government in Australia’s history.

    So if we wanted to get a surplus as a political objective, a surplus at any cost, we would simply apply taxes at the rate that the previous government did and you know what the surplus would be; more than $20 billon.

    From Blair’s blog, the quote above is from our good mate Emmo. As Blair says, Emmo is effectively claiming that the government could have delivered a surplus, they.just chose not to. So they’ve been lying all along.

    The claim is laughable in any case. I’d like to see a detailed analysis of all of the various rates of tax, but as far as I am aware the government has changed income tax a bit, but for most of the period they have been in power, existing tax rates have not really changed much. They have also added two new taxes, so to claim that if they applied the rates of tax employed by the Howard government they would have been able to deliver a surplus of 20 billion or more is just dishonest. Shocked I am. Just shocked.

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