The government keeps making a claim about revenue having fallen. Here is Julia Gillard telling this story to school kids on Monday.
… I think people kind of intuitively know that it’s been a pretty tough period for business and if it has been a tough period for business, that means they are making less money. If they are making less money they are paying less tax and that is less tax than we predicted. So overwhelmingly it’s less money coming in that has changed the Government’s budget.
Okay – except for the small problem that this explanation is actually not true. We have plotted the data from the MYEFO many times but today I want to point to a graph doing the rounds on Facebook.
To my mind this graph does a good job at dispelling the lie that the government has less money coming in. Sure it might have less money coming in relative the expectations – but the government simply does not have less money coming in.
This morning Greg Jericho does an audit of various political graphs that are doing the rounds and critiques all of them pointing to shortcomings and misleading indicators etc. Included in his sample is the graph I’ve shown above.
So, we have a poor time scale, distorted vertical scale and use of nominal dollars that exaggerates current revenue.
Those criticisms are true; but correcting for those issues doesn’t change the story the graph tells us.
So first thing that I did was add in real dollar figures that I calculated using the RBA inflation calculator. All real dollar amounts are in 2012 dollars – that is the latest year that the calculator will allow.
Revenue recovery is a bit more sluggish but more or less increases after the GFC – so adjusting for inflation doesn’t change the story. What about changing the vertical scale?
No – revenue is still increasing in recent years.
Finally what about increasing the time scale?
No – still doesn’t change the story.
Now I see this sort of thing all the time. Student often think that if they are able to come up with a criticism that is correct that the argument being made is always and automatically discredited. Now to be fair Jericho isn’t trying to discredit any particular graph, he is warning about misleading graphs.
The moral of this all is that when a friend starts sharing graphs on Facebook, ask yourself what the graph is trying to highlight, and what it is failing to show. Think about the time period used, the measurements used and be sceptical.
And always remember, graphs aren’t always the whole picture, let alone the whole story.
I think that’s all correct, yet it is always true. There is always more to the story than the picture, but sometimes not too much more. The government argument that revenue is down is not true. Down on expectations – yes. Down as a percentage of GDP – probably, but still at about the long-term average.