In Question Time Julia Gillard got asked when the ALP would ever balance the budget. Abstracting from the theatre of the moment (Tony Abbott did lay it on a bit thick) that is a reasonable question.
Gillard blamed the GFC for reducing government revenue resulting in budget deficits.
We’ve covered this ground before and it just isn’t true.
First look at the table – it sets out actual and expected tax revenue from recent Budget Papers and the latest MYEFO. (Remember – tax revenue is not total revenue).
At the height of the GFC, in early 2009, the government was busy preparing its 2009-10 Budget. That Budget forecast taxation revenue out to 2012-13 – this financial year. At that time the government expected to raise some $321 billion in tax revenue. The latest MYEFO indicates that the government now expects to raise some $339 billion in tax revenue this year.
So, in fact, tax revenue is above expectations that were formed at the depths of the GFC.
Expected tax revenue was ramped up in the 2010-11 Budget and again in the 2011-12 Budget. While actual tax revenue grew in those years, it didn’t meet expectations. Yet the government based spending decisions on expected tax revenues that disappointed two years in a row.
So the government didn’t learn from its mistakes. Those mistaken expectations were formed after the GFC – so it is bit difficult to blame them on the GFC itself.
So the follow up question was how can the prime minister keep blaming the GFC given that it ended four years ago? At this point she was left blustering about Greece, Cyprus, Italy etc. In short claiming that the GFC never ended. I don’t know that this sort of argument helps her case. The party line has been that (a) the Rudd government saved Australia from the GFC and (b) things were so good that we’d be back to surplus this year. We’re now invited to believe (c) the GFC never ended. But those three propositions are incompatible with each other.