Former economist says surplus still possible at Catallaxy Files

Former economist says surplus still possible

I wonder whether Andrew Leigh still stands by his claim made in mid-January that a budget surplus is still possible (AHAHAHAHA).

Labor backbencher Andrew Leigh, a former economist, says lower commodity prices and an unusually high Australian dollar has knocked $20 billion off the government’s projected revenues in the past year.

But achieving a surplus was “certainly possible”.

“The treasurer last year didn’t rule out a surplus, just said that one was looking unlikely given what’s happened to revenues,” he told Sky News on Monday.

Dr Leigh said if the Gillard government enjoyed the same tax-to-GDP ratio as the Howard government it would easily be achieving a surplus this year.

I wonder whether he will be repeating this claim in the coming weeks as the government reverses its health cuts, introduces an unfunded Jobs for Australia package, desparately splashing money around, etc, etc.

On Leigh’s last point, he is surely being a bit disingenuous. After all, this government has not altered tax RATES and has added new taxes. The erosion in the tax base is the key. Maybe he is a former economist after all.

Written by Judith Sloan

February 21st, 2013 at 10:08 am

Posted in Uncategorized

47 Responses to 'Former economist says surplus still possible'

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Tough but fair Judith. My local member still also clings to the notion of “carbon price” despite Gillard admitting it is a tax ages ago.

Keith

21 Feb 13 at 10:22 am
Labor backbencher Andrew Leigh, a former economist…

…and current all round go to numptie embarrassment.

Rabz

21 Feb 13 at 10:26 am
Well, they are dipping their grubby fat fingers into our Super, so anything’s possible.

Gab

21 Feb 13 at 10:27 am
Maybe he is a former economist after all.

Like Paul Krugman being a party political and ideological hack repudiates him as an economist?

Like a modern day Labor PM or Dem President is a repudiation of a leadership that acts in the national interest over party political gamesmanship?

JamesK

21 Feb 13 at 10:30 am
If you borrow money to pump up the GDP, then of course the tax take as a percent of GDP has to fall. It also crowds out private Investment, which means less future revenue as well as the loss making government projects eat through resources in a show of vanity over common sense.

brc

21 Feb 13 at 10:30 am
The Leg-over Man’s apprentice? Studied at the foot of the master.

H B Bear

21 Feb 13 at 10:31 am
Studied at the foot of the master

Jesus! What a view from there.

Steve of Ferny Hills

21 Feb 13 at 10:36 am
Maybe we should run a book on the final size of the budget DEFICIT for 2012-13?

Judith Sloan

21 Feb 13 at 10:42 am
My opening bid is $12.345 billion!!!

Judith Sloan

21 Feb 13 at 10:43 am
I’m tipping $70billion when the account forensics have been completed by an independent body.

Gab

21 Feb 13 at 10:44 am
No one could afford the odds on >$20 billion.

The book would be forced to close.

JamesK

21 Feb 13 at 10:44 am
In 2011-12, the Australian Government general government sector recorded an underlying cash deficit of $43.7 billion (3.0 per cent of gross domestic product (GDP)). The fiscal balance was in deficit by $44.5 billion (3.0 per cent of GDP).

I’m going at least $30 billion.

Rabz

21 Feb 13 at 10:47 am
My opening bid is $12.345 billion!!!

LOL, Judith believes Shane Wand has a remnant of shame left.

But he never had any in the first place Judith.

JamesK

21 Feb 13 at 10:47 am
I’m tipping $70billion when the account forensics have been completed by an independent body.

You’re probably correct.

Rabz

21 Feb 13 at 10:48 am
Just being strategic – bid at the edge.

Judith Sloan

21 Feb 13 at 10:49 am
The “former economist’s” prediction ranks up there with News Ltd’s Jessica Irvine’s column from yesterday.

James of the Glens

21 Feb 13 at 11:10 am
Perfesser Leigh says:

if the Gillard government enjoyed the same tax-to-GDP ratio as the Howard government it would easily be achieving a surplus this year

But if the Gillard Government had the same spending-to-GDP ratio has the Howard Government it its last year (23.1 per cent), it would also be achieving a surplus this year.

What exactly is his point? That Howard would have achieved a surplus whilst Gillard and Swan will never deliver one? I think we already knew that.

Milton Von Smith

21 Feb 13 at 11:19 am
Former economist – is that like former lawyer?

ar

21 Feb 13 at 11:35 am
“if the Gillard government enjoyed the same tax-to-GDP ratio as the Howard government it would easily be achieving a surplus this year”

And if Howard had the number of dollars in tax revenue Swan has at his disposal now Costellos surpluses would have been pushing $100b.

I’m so sick of that tax-GDP ratio argument, its the only one the ALP can use to try and show that the nearly $400b in tax revenue they are/were projecting is somehow smaller than the $270b Costello had in his best year.

ugh

21 Feb 13 at 11:41 am
And if Howard had the number of dollars in tax revenue Swan has at his disposal now Costellos surpluses would have been pushing $100b.
I’m so sick of that tax-GDP ratio argument, its the only one the ALP can use to try and show that the nearly $400b in tax revenue they are/were projecting is somehow smaller than the $270b Costello had in his best year.

Looking at things in real terms is a fair comparison because $270bn in 2007 is comparable in real terms when the economy has grown but Leigh’s argument is wrong on many fronts.

Andrew

21 Feb 13 at 11:46 am
Ms. Judith might be interested in this posting from E.M.Smith at his blog, Musings of the Chiefio.

Current Account – Who gets the cash

From a chart in 2008-
Cumulative Current Account Balance

Now the most startling number, bar none, is that last one.
Those numbers are in Billions.
The USA has had 7.3 Trillion dollars of cumulative current account outflows.
It covers the entire top 6 and most of Saudi Arabia in #7 position, net inflow countries.
Totalling 7.498 vs -7.335 for the USA.

Also of interest is the country list just above the USA. Spain, UK, Australia and then Mexico, Italy, and Greece.
Brazil and Turkey stuck in between them and Portugal.

The UK has clearly been liquidating for years, and one wonders what Australia has been spending on, what with all those mineral and grain exports.

“The USA – Ten Spains and deeper in debt”

handjive

21 Feb 13 at 12:19 pm
If you borrow money to pump up the GDP, then of course the tax take as a percent of GDP has to fall.

brc makes a good point. Should the Tax-to-GDP ratio really be the tax-to-(GDP less Govt Spending)?

Or at the least net govt spending (ie govt expenditure less increase in debt).

Im not an economist (oh really you say!!!!) but for a long time I have been struck by how important GDP is to the govt, as it is used to indicate growth, recessions, tax take etc, and yet is able to be manipulated by govt borrowings. If economic indicators used only net govt spending, or excluded govt spending, then would this provide better indicators for economic activity.

dianeh

21 Feb 13 at 12:39 pm
And yes I realise that debt is a liability and not an expense, but it should matter where the cash comes from for the expenditure if it is going to be included in the GDP calculation.

dianeh

21 Feb 13 at 12:44 pm
Deficit betting market?
If the election was 2014 I would have said $30 bn.
I am making it $42bn to allow for the pork-barreling by the porker-in-chief.

Leigh Lowe

21 Feb 13 at 12:49 pm
I’m tipping $50-$60B deficit.

Andrew Leigh has done some good work as an academic. His paper on gun control in Australia is an example.

However, when he strays into partisan political territory off comes the head and on goes the pumpkin.

Jack Lacton

21 Feb 13 at 12:50 pm
Original mining tax ‘would cost billions’

Collapsing commodity prices have hit BHP Billiton and Rio Tinto so badly that if the government had stuck with the original version of its mining tax, it would be up for billions.

BHP’s profit has more than halved. Rio has lost $3 billion. Under either version of the super profits tax, they would owe the government nothing.
But under the tax originally proposed by Kevin Rudd and Wayne Swan they and other mining companies would also be entitled to a refund of the royalties they had already paid state governments.

In Western Australia alone, iron ore royalty payments amount to $4 billion a year. This would have been paid to the companies whether or not they owed any super profits tax, meaning they would have received a cheque from the government.

H/t Tim Blair

Thank God for TLS’s great negosheaating skill in saving us $billions

JamesK

21 Feb 13 at 1:32 pm
Judith

An astonishing number of occurences follow the sequence of Leonardo of Pisa. So discarding the first two seed numbers I’m going a little higher than your estimate -

$12, 358 billion and if you only discard the first, a little lower -

$11, 235 billion

Grant B

21 Feb 13 at 1:32 pm
Leigh’s paper on gun control was a reaction to a non-partisan study that didn’t have the conclusions he liked. His paper was a discussion paper rehashing his personal opinion of the original with a weak substantiation of his position at best.

John Mc

21 Feb 13 at 1:35 pm
If Leigh’s paper on gun laws was amongst his best as an academic, I’m not surprised he changed careers.

Eddystone

21 Feb 13 at 1:53 pm
Collapsing commodity prices have hit BHP Billiton and Rio Tinto so badly that if the government had stuck with the original version of its mining tax, it would be up for billions.

BHP’s profit has more than halved. Rio has lost $3 billion. Under either version of the super profits tax, they would owe the government nothing.
But under the tax originally proposed by Kevin Rudd and Wayne Swan they and other mining companies would also be entitled to a refund of the royalties they had already paid state governments.

In Western Australia alone, iron ore royalty payments amount to $4 billion a year. This would have been paid to the companies whether or not they owed any super profits tax, meaning they would have received a cheque from the government.

H/t Tim Blair

Thank God for TLS’s great negosheaating skill in saving us $billions

I can’t be certain, but I would bank on yet more shonky analysis coming from the keyboard of Peter Martin (general chucklehead and Wayne Swan’s patsy of an economic commentator). I suspect he hasn’t even tried to take into account that the royalty refunds only applied to royalty rates on the day the RSPT was announced.

Skuter

21 Feb 13 at 1:59 pm
achieving a surplus was “certainly possible”

A surplus of lies from the Treasury, that is.

Mother Hubbard's Dog

21 Feb 13 at 2:05 pm
If Leigh’s paper on gun laws was amongst his best as an academic, I’m not surprised he changed careers.

So my esteemed local ‘member’ is both a former economist and a former academic!

Rabz

21 Feb 13 at 2:06 pm
Rabz, that is better than having a former unionist and former political staffer as your MP. You are unique!

Andrew

21 Feb 13 at 2:12 pm
“Dr Leigh said if the Gillard government enjoyed the same tax-to-GDP ratio as the Howard government it would easily be achieving a surplus this year.”

Claim 1 – the Govt has done a great job with the economy, world’s greatest finance minister take a bow.

Claim 2 – we’re not getting the tax take of little johny because the economy’s shite.

go figure

Pedro

21 Feb 13 at 2:18 pm
Thanks Andy, it’s just a pity we won’t be able to add ‘former politician’ to his CV after the next election!

Rabz

21 Feb 13 at 2:28 pm
I can beat those formers. My member, Andrew Wilkie, is a former army officer, former intelligence analyst, former Liberal, former Green, former carpet salesman, and a former minority government former.

Deadman

21 Feb 13 at 2:31 pm
Fyi, my member is Alan Griffin.

Andrew

21 Feb 13 at 2:42 pm
Old mate just shot thirty cows with their calves because he couldn’t afford hay. The money he normally would have spent on getting the hay bailer in over summer, went on power bills.
A microslice of the economy.

Winston SMITH

21 Feb 13 at 4:50 pm
Whacked by the CO2 tax. Prior to the carbon dioxide tax, 7kgs refrigerant cost $481. After the carbon dioxide tax cost $1364 + GST. Naturally this has to be passed onto customers.

From 2GB caller, a bottle shop owner who employs nine people.

Gab

21 Feb 13 at 6:07 pm
On Leigh’s last point, he is surely being a bit disingenuous. After all, this government has not altered tax RATES and has added new taxes. The erosion in the tax base is the key. Maybe he is a former economist after all.

He’s a dishonest little squib. He took taxpayer money and used it to fund propaganda that the ABC is rightwing. Despicable,

Jc

21 Feb 13 at 6:13 pm
He is a Lying ,Deviousdeceitfull,Over”educated”,Selfseeking Mogerel ,Soshalist ,Greedy ,Bludging Tosser ! Who would speak to this Wanker ?

Borisgodunov

21 Feb 13 at 7:25 pm
lol good to get that off your chest, Boris.

Gab

21 Feb 13 at 7:28 pm
Over-educated is a thing now?

Jarrah

21 Feb 13 at 7:30 pm
I mean “educated ” as in soshalist brainwashed,not REAL Education as in Medical,Engineering and Research Science ,as distinct from GrantbSeeking Gullible Warning Rubbish !

Borisgodunov

21 Feb 13 at 8:56 pm
Sure. It’s a common thing for a person to spend years studying a wide variety of things and yet know nothing.
We all knew at least one professional student when we went to uni.

Entropy

21 Feb 13 at 9:05 pm
Educated beyond one’s means of common sense.

wreckage

21 Feb 13 at 9:34 pm
Did you who can read experimental design LOOK at that gun control study? I suppose you also approved his finding that the ABC is a biased right-wing organisation, based on the measurement that MPs quoted certain think-tanks more than other think-tanks!

Andrew Leigh has done some good work as an academic. His paper on gun control in Australia is an example.

However, when he strays into partisan political territory off comes the head and on goes the pumpkin.

If you haven’t figured out that gun control is a partisan issue, you aren’t as swift as I thought. Its a way to display moral superiority that pays off all the New Class not just lefties. You can tell if an economic idea is well designed by seeing who is against and who is for – and who were the pack of Mr Howard’s lynch mob in 1996? The media class, the PC urban middle class and the academics. The same ones who tongue-bathed Kev and Julia and Wayne all those years.

ChrisPer

21 Feb 13 at 11:34 pm

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