Swan’s rivers of gold

The Australian is reporting that the government will announce today that revenue this financial year will be $12 billion down on forecasts last October (i.e. the MYEFO).

In a speech in Canberra today, Ms Gillard will reveal that tax revenue forecasts will continue to slip for the rest of this financial year, leaving tax revenue growing more slowly this year than had been forecast.

On today’s update, federal tax revenue will be about $340bn in 2012-13, down from the forecast of $352bn last October but up about 7 per cent on tax revenue in 2011-12 of $316.8bn.

“The bottom line for the budget bottom line is this: the amount of tax revenue the government has collected so far this financial year is already $7.5bn less than was forecast last October,” the Prime Minister will say.

“Treasury now estimates that this reduction will increase to around $12bn by the end of the financial year.

“This unusually low revenue, which wasn’t forecast even a few months ago, creates a significant fiscal gap over the budget period.”

On Twitter Adam Creighton is sceptical:

Revenues are not “unusually low” when they are still growing 7% a year; rather, foolish spending and forecasting.

Anyway, I thought I’d update the graphic of revenue over the Howard era and Rudd/Gillard era.

Latest Receipts April 2013

I’ve calculated this figure by reducing the MYEFO receipts figure by $12 billion. I’m not sure where the numbers reported in the Australian come from.

On today’s update, federal tax revenue will be about $340bn in 2012-13, down from the forecast of $352bn last October but up about 7 per cent on tax revenue in 2011-12 of $316.8bn.

In October last year the MYEFO was reporting an expected $339 billion in tax receipts and $28 billion for the 2012-13 financial year.

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31 Responses to Swan’s rivers of gold

  1. C.L.

    Gillard and Swan are the first socialists in history who can’t even raise taxes.

  2. H B Bear

    Mother Goose is working up the fairy stories for the historians.

  3. mareeS

    The political message the coalition needs to send out immediately is that revenue is up 7% on 2011-12, but the government has already spent that and more, even before new commitments like education and disability are factored in.

    These people are at next month’s race meeting, punting on a horse that will never be saddled.

  4. Driftforge

    Sinc – is there a standard overall measure against which tax take can be reasonably compared that takes into account capacity to pay rather than just total available?

  5. Tom

    Sinc, the last I remember hearing about a month ago was that the 2012-13 budget was $26 billion in deficit. Do we simply add together the $26 billion and the latest $12 billion shortfall to get a $38 billion deficit estimate? I would like to hear your educated guess.

  6. Sinclair Davidson

    Tom – I don’t recall the $26 billion figure. I suspect the budget is somewhere between $10 billion and $20 billion in deficit.

    Dirftforge – no, not really. The capacity to pay is probably higher but the willingness to pay ATM isn’t. So government will struggle to squeeze any more blood from the stone.

  7. Luke

    Labor the Ari Gold of governments. “Lie! Lie till you die!”

    I can just here the ABC lines all through the election. Abbott can’t keep any of his promises because there is no more money. Needless to say that that same logic will be missing to all of Labor’s promises.

    Anna Bligh did this for QLD election 2009.She made sure everyone knew that we were “suddenly” broke and that the opposition couldn’t promiose anything without being attacked as making the budget worse for Queenslanders. Spending was ‘making things worse’ and cuts were ‘damaging’. Heads she won, tails they lost.

  8. Tom

    Sinc, here’s the exact source I was referring to — apparently an email from Opposition finance spokesman Andrew Robb to Bolt quoting Treasury figures:

    The monthly statements dropped out at 4.20pm on Friday show that for the year to February Labor has actually raised $15.8 billion more in revenue compared to the same period last year – an increase of 7.2 per cent.

    Despite this, the financial statements show, a deterioration in the underlying cash balance of $5.7 billion compared to the Mid Year Economic Fiscal Outlook released just five months ago.

    The budget to February is currently in deficit to the tune of $23.6 billion compared to the $17.9 billion deficit estimate in MYEFO. This confirms Wayne Swan is on track to deliver his fifth consecutive budget deficit despite growing revenue, and terms of trade still about 15 per cent higher than what he inherited, after growing to 150-year highs.

  9. Entropy

    How would that revenue chart look if you added a line showing the previous budget projections?

  10. Leigh Lowe

    Sinc, the last I remember hearing about a month ago was that the 2012-13 budget was $26 billion in deficit. Do we simply add together the $26 billion and the latest $12 billion shortfall to get a $38 billion deficit estimate? I would like to hear your educated guess.

    Tom.
    This is PR pea and thimble trick at work.
    Both Goose and TLS have referred to revenue shortfalls in the last week or so.
    Incidentally, Goose cited a figure of $7.5bn in the last ten days or so, now the Droner says $12bn, but not a peep out of the press gallery cheer-squad about the inconsistency.
    But revenue is only part of the deficit story with expenditure being the other side of the coin.
    I’ll bet the too-smart-by-half liars will bandy this revenue story around for a day or two, then, at a later stage, casually mention that there are spending issues as well.
    Not really lying, but not giving a coherent truthful account either.
    I imagine expenditures are well off the rails as well (asylum shoppers being a case in point) so the deficit must be well over $20 bn.

  11. Leigh Lowe

    How would that revenue chart look if you added a line showing the previous budget projections?

    Would need logarithmic scale on the Y Axis.

  12. Leigh Lowe

    Tom – I don’t recall the $26 billion figure. I suspect the budget is somewhere between $10 billion and $20 billion in deficit.

    Sinc.
    Do you reckon?
    They initially projected a budget surplus of $1.5bn.
    The Droner now says that revenue is $12bn in the hole.
    I make that a $10.5 bn deficit before any expenditure hits.
    We know that they were incredibly optimistic about the cost of asylum-shoppers and, I can’t be sure of the number, but I thought that this was projected to hit expenditures by circa $5bn.
    Can you point to one compensatory expenditure saving which would mitigate the above?
    If not, they have to be $15 bn under water already.
    And, if they run true to form, the red ink will be well over $20bn IMHO.
    Does that make sense?
    Have I missed something?

  13. Entropy

    Leigh, LOL, but seriously, the forecast revenues would show regular under estimation compared with actuals during the Costello years, regular over estimation in the Swan years.

  14. Milton Von Smith

    The stories seem to be quoting accrual revenue rather than underlying cash revenue. (see page 54 of MYEFO). Not sure why.

    Everyone seems to have forgotten that in underlying cash terms, MYEFO actually revised up revenue forecasts as a share of GDP, relative to the Budget forecast (see page 40 of MYEFO).

    As Ricky Ricardo used to say: “somebody got some splainin to do!”

  15. Robbo

    You have to feel a little bit sorry for Gillard. There she is facing the media and talking about her self induced financial mess and trying to look intelligent. Now this is a really hard ask of a person who cannot chew gum and walk at the same time and that’s why she should have handballed this shambles to Wayne Swan. Oh, on second thoughts maybe that’s not a good idea. Anyone out there in Labor Party lala land who wants to front the media and explain? No? Didn’t think there would be any volunteers.

  16. Sinclair Davidson

    If not, they have to be $15 bn under water already.

    Yep – 15 is a number between 10 and 20. What happens next all depends on the games Swan plays – now I can’t predict that. but if I was him I’d be pushing as much as I can into next financial year being the first year of an Abbott government.

  17. Driftforge

    Dirftforge – no, not really. The capacity to pay is probably higher but the willingness to pay ATM isn’t. So government will struggle to squeeze any more blood from the stone

    Ok. So lets take the Georgist view (because they at least have one on this): A full tax is equal to the annualised value of land.

    They use ‘land’ a little bit more collectively, but lets take the land value series in ABS 5204 T61 as a proxy.

    Also need a suitable proxy for annualisation of that, for which we’ll take the average standard variable home loan rate for that year.

    Now compare it to government expenditure – here I’ve used 5204 T35 – Federal total consumption expenditure. Doesn’t include state expenditure. Not sure if this is the best choice, but it’s what I found while scratching

    And the GDP series.

    So we end with a normalised chart of Federal expenditure against GST, and Federal expenditure against cost of capital for the land base.

    Probably needs work, but I think clearly identifies the current relative increase in cost of government vs the coalition quite well.

    Also shows how much the land asset base expanded during the coalition years.

  18. Driftforge

    How would that revenue chart look if you added a line showing the previous budget projections?

    Generally a return to the pre-GFC trend is what I’ve seen when I’ve looked at comparative plots.

  19. Forget what Gillard and Swan say, this chart on the link proves the Gillard Gov’t has a severe spending problem and the promises they make – Gonski Ed, NDIS, etc. – can’t be believed.

    Ref: http://www.andysrant.com/2013/04/thanks-to-labor-we-simply-dont-have-the-dough-to-pay-for-gonski-ndis-nbn-and-much-else.html

    Thanks to Labor, we simply don’t have the dough.

  20. Entropy

    Yep – 15 is a number between 10 and 20. What happens next all depends on the games Swan plays – now I can’t predict that. but if I was him I’d be pushing as much as I can into next financial year being the first year of an Abbott government.


    He has already done that back in the day he was trying for a surplus in 2012-13. That and bring forward expenditure into 2011-12.

  21. Just A View

    Hope this doesn’t seem too obvious but I think we’re softened up for some minor tax increases. They’ll only impact the ‘rich’ – ie those who earn more than $100k or so.

    Where are they spraying the money against wall? Yes, they’re raising plenty of revenue but I’m yet to see any analysis which shows what departments are spending all the money compared to the Howard years. This is a fairly difficult task given changes in departmental responsibilities. But a broad picture should be possible. We know it’s not defence as it’s been chopped beyond the bone.

  22. Leigh Lowe

    Yep – 15 is a number between 10 and 20. What happens next all depends on the games Swan plays – now I can’t predict that. but if I was him I’d be pushing as much as I can into next financial year being the first year of an Abbott government.

    I get the arithmetic Sinc, but I guess the point was that they are already at $15bn with admitted revenue hits (which no doubt will be low-balled) and one major expenditure hit.
    Do you genuinely believe that the rest of the expenditure line items are on track?
    If they are off by just 2% that will push them well over the $20bn mark, and the form-line tells us that they will be.

  23. Leigh Lowe

    Oh and Sinc, Swannie played the shovel forward game last year and that can become harder and harder. Although they would probably like some of the voter lollies to fall in August and the first two weeks of September.
    But the regular business of Gumment (pensions, benefits, salaries) can’t be pushed out into FY14.

  24. Leigh Lowe

    You have to feel a little bit sorry for Gillard. There she is facing the media and talking about her self induced financial mess and trying to look intelligent. Now this is a really hard ask of a person who cannot chew gum and walk at the same time and that’s why she should have handballed this shambles to Wayne Swan. Oh, on second thoughts maybe that’s not a good idea. Anyone out there in Labor Party lala land who wants to front the media and explain? No? Didn’t think there would be any volunteers.

    Seriously, what do you make of that?
    She pissed off on holidays before Christmas and left Swannie holding the bag to admit that the surplus had gone west.
    Why step forward now?
    Is this some “new Julia Mk 2.5.1” strategy to pretend to be somehow in charge and taking ‘sponsibility.

  25. Sinclair Davidson

    Leigh – I don’t have a dog in the race. My guess is 10 – 20. Could be as high as the 30s. But they will have to muck around with the numbers. A smaller deficit is good for the government, a bigger deficit worse. So they will push stuff into next year (or at least try to).

  26. mareeS

    “a person who cannot chew gum and walk at the same time”

    What she actually said while attempting to demonstrate her intellectual prowess was “chew and walk gum” then mashed it a second time, before finally giving it up.

    Our PM at work.

  27. Just A View

    Based on MYEFO 12/13, revenue this year is expected to be 34% higher than 06/07 (last full Howard year). Expenses are 45% higher than same period.

    Let’s break the expenses down:

    – General public services – 64% higher ($24b)
    – Defence – 30% higher ($21.6b)
    – Public order and safety – 20% higher ($4b)
    – Education – 75% higher ($30b)
    – Health – 53% higher ($61b)
    – Social security – 43% higher ($131.6b)
    – Housing and community ammenities – 250% higher ($7.2b)
    – Recreation and culture – 41% higher ($3.6b)
    – Fuel and energy – 41% higher ($6.5b)
    – Agriculture, forestry & fishing – 8% lower ($2.6b)
    – Transport and communication – 53% higher ($5b)
    – Other economic affairs – 80% higher ($9.3b)
    – Other purposes – 29% higher ($66.8b)

    I don’t think this includes the NBN stuff.

  28. Jim Rose

    forecasting is hard, especially about the future said yogi berra. there is a quote over at cafe hayek from Deirdre McCloskey comparing economists to art critics.

    An economist looking at the business world is like a critic looking at the art world.

    Economists and other human scientists can reflect intelligently on present conditions and can tell useful stories about the past.

    These produce wisdom, which produce broad, conditional “predictions.” Some are obvious; some require an economist; but in equilibrium, after the $20 bills have been picked up, none is a machine for achieving fame or riches.

    The study of the human sciences can produce wisdom, routine predictions. It cannot produce profitable prediction and godlike control.

    there is also a question somewhere about who has the easier job: an economist forecasting the economy or the art critic forecasting the future of art.

    perhaps that is why entrepreneurship is an art.

  29. Pingback: Labor’s Budget Lie | Australian Taxpayers' Alliance

  30. I’m not sure where the numbers reported in the Australian come from.

    It is the front page story in the Fin Review so I suspect a very good source inside government. It is said Treasury has told the government.

    Just a View
    The fuel and energy figure might be misleading because it includes the diesel fuel rebate I think.

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