The budget is in deficit

The Wall Street Journal Asia reminds its readers of the facts, and not the empty dodgy promises.

Canberra said GDP grew 2% this year and projects it will grow around 3.25% in the 2010-11 fiscal year and 4% the year after that. Had that not happened, the 54.8 billion Australian dollar ($49 billion) deficit in the 2009-10 fiscal year, or 4.2% of GDP, would have been higher because of the Rudd government’s many and varied public-spending initiatives.

Add this all together and voila!, you get a magic elixir of projected fiscal balance in an election year. “Not one single pre-election budget of the former [Liberal Party] government delivered net savings over the forward estimates,” Mr. Swan said Tuesday. He expects next year’s deficit to fall to A$39.6 billion, or 2.8% of GDP, and projects a small surplus by the 2012-13 fiscal year.

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39 Responses to The budget is in deficit

  1. Pedro

    This reminds me of something else. The Govt has been claiming that last year the Libs said that the forecasts were wrong and that they were too pessimistic. My recollection is that that is correct, but not in the way the govt claims. The accusation was not that the recession would be deeper than projected, but that the post-recession recovery rate was too high at a predicted 4%.

    I’m pretty sure that there were arguments here about this (mainly with Homer).

  2. JC

    Pedro:

    Their forecasts are horrible. It would be saving the country a lot of money if we fired all the economists in treasury, then had the treasury head’s PA call all the I-banks and banks get their forecasts and then run an average.

    If they needed more they could pay for it from one of the consulting firms by putting the specs out to tender.

  3. Butterfield, Bloomfield & Bishop

    Pedro,
    Last year the opposition and sinkers said the forecasts and projections were far too optimistic.

    They were dead wrong because they misjudged how quick the recovery would be because of the stimulus.

    There is no need for a balanced budget as yet because that would be highly restrictive.
    At present fiscal policy is restrictive not neutral like monetary policy.
    If revenue comes in stronger than anticipated then it will be banked and make the budget more restrictive.

    I wouldn’t be surprised if the deficit figure has a 2 in front of it.

    The budget also shows we would have had a deep recession without the stimulus

  4. Skuter

    Indeed, Pedro, my recollection accords with yours. Treasury have revised their 2009-10 Budget GDP forecasts/projections for 2011-12 and 2012-13 down (from 4.5 per cent both years to 4 and 3 per cent respectively). The slower recovery trajectory is obviously because we didn’t have as deep a slowdown as initially anticipated. Thus, there is nothing inherently inconsistent about what the opposition is saying…

  5. JC

    Last year the opposition and sinkers said the forecasts and projections were far too optimistic.

    Doofus, the Treasury was forecasting and projecting a recession.

    They were dead wrong because they misjudged how quick the recovery would be because of the stimulus.

    Or perhaps they misjudged what all the oceans of liquidity sloshing around the world as a result of loose monetary policy would do.

    There is no need for a balanced budget as yet because that would be highly restrictive.

    True. Restrictive budgets only apply for the liberals. Moron, one bad move by the Chinese economy and we’re looking at $100 billion annual deficits. Do you recall how you scoffed at that (my) guess back in the latter part of 08 when SwanDive was still forecasting a surplus and I said we could be looking a deficit of $60 billion. You have no business ever talking about these adult maters.

    At present fiscal policy is restrictive not neutral like monetary policy.

    Are you sane? We have a deficit of $40 billion you moron.

    If revenue comes in stronger than anticipated then it will be banked and make the budget more restrictive.

    Honest question. In quiet times have you ever thought of the possibility that you’re perhaps the worst trained economist in the country?

    I wouldn’t be surprised if the deficit figure has a 2 in front of it.

    I wouldn’t be surprised if your IQ has a 2 in front of it and I’m not thinking of 200.

    The budget also shows we would have had a deep recession without the stimulus

    Yea, how so, doofus?

  6. Pedro

    That’s it exactly thanks skuter. I well recall Homer referring to some graph that was in fact no evidence for the claim he was making. Now he says we have a strong recovery because of the stimulus and not the terms of trade being way better than Treasury forecast.

    JC, the point is not that treasury forecasts are wrong, who would expect them to be otherwise. The govt now says the Libs were unduly pessimistic about the recession and that is evidence they are being too pessimistic about the recovery of tax receipts, and they seem to be getting away with it.

  7. Butterfield, Bloomfield & Bishop

    Forrest do yourself a favour go to high school and do some economics.

    Only an absolute idiot would say a deficit means it is stimulatory and a surplus means it is restrictive.

    Remember 2007 at all?

    yes I do r,member saying that and I said It could ONLY happen if the government had a stimulus program.
    Duh!

    no the forecasts and projections were AFTER the recession you know positive growth 4% and all that.

    you should have tried to complete the HSC

  8. C.L.

    Homer’s metamorphosis into Dick Cheney is complete.

    Deficits don’t matter.

  9. JC

    Pedro:

    The govt now says the Libs were unduly pessimistic about the recession and that is evidence they are being too pessimistic about the recovery of tax receipts, and they seem to be getting away with it.

    They should be. A huge portion of the receipts is a bet on the Chinese story being sustainable. It’s not possible for them to grow at 13% while interest rates are at around 2%.

    We don’t have any protection on the downside and if the Chinese do catch the flu we’re cooked.

  10. Pedro

    “you should have tried to complete the HSC”

    We don’t have it here. Qld has a stupid emphasis on spelling and logic instead.

  11. JC

    Forrest do yourself a favour go to high school and do some economics.

    Good idea Homer. Which school did you go to, as I’ll know not to got there for obvious reasons.

    Only an absolute idiot would say a deficit means it is stimulatory and a surplus means it is restrictive.

    I didn’t, you irrationally overconfident loon. I said this budget is putting us at serious risk. The structure of the deficit is the equivalent of an all in at the poker tables with a pair of 2’s.

    yes I do r,member saying that and I said It could ONLY happen if the government had a stimulus program.
    Duh!

    Homer, do you dribble every time you say duh? WTF are you talking about. What are you trying to say?

  12. Pedro

    “We don’t have any protection on the downside and if the Chinese do catch the flu we’re cooked.”

    Yes, don’t bank on the best outcome for things outside your control.

  13. dover_beach

    How can you put a surplus at risk when there is no surplus but a 40B deficit? This government is perpetually en voyage to some projected destination to which it never arrives.

  14. C.L.

    Yeah, the second biggest deficit in dollar terms on record.

    And Barnaby Tanner says it’s all AT RISK!

  15. JC

    If that’s all Tanner has got to shoot with the venom filled fool is shooting blanks.

    The surplus he’s referring to is $1 billion in 2013.

    The accumulated budget between now and then is:

    $400 billion a year X 4 years = $1,600 billion.

    1/1,600 = 00063.

    Tanner would like us to believe that the budget is within .063% accurate by 2013.

    They can’t even lie well anymore. LOL.

  16. JC

    At 1/1,600 tanner is better off taking the entire $billion budget surplus and sticking it on number 3 on the roulette table at the casino. He’ll much better odds where he can “pocket” 35:1.

  17. Butterfield, Bloomfield & Bishop

    Forrest and the rest of the loons.

    if the structural deficit is lower this year and it is then the effect on the economy is negative.

    This has been around in national accounting for yonks.

    If the structural deficit is higher than the previous year like in 2007 then it is stimulatory.

    Yeah the bloke who said Italy was better placed than us is saying we are at risk when each time the deficit and debt figures are revised down.

    If we assume the RBA is correct in its assessment of commodity prices then it is more than likely the next budget although still balanced will be in the black

  18. “if the structural deficit is lower this year and it is then the effect on the economy is negative.”

    This is such a dishonest snow job. It’s almost like an urban myth. Don’t worry about your kids being supervised by an adult who is a fit and proper person (budget balancing), worry about a stranger in a car abducting them (“stucteal defecits”).

  19. JC

    Homer:

    Do you understand that any discussion on a structreal deficit these days is moot?

    Do you understand that we’re walking down the beach with a tsunami only a few miles away?

    Any discussion on structreal deficits and surpluses is so far away from this discussion it’s not funny.

    Get back behind that garage and don’t come out, you irrationally overconfident, audacious loon.

  20. JC

    SRL

    Would they use , or can we obtain any information on how the Treasury derived it’s forecasts on commodity prices?

    It would be really interesting to see what sort of volatility they used for the forward curve. Some of that stuff is trading on at-the-money 35% which means expectations are for very volatile markets.

    It would also be interesting to see what rationale they used for these projections as I have a hunch they pulled the prices forecast right out of their behind in other to give this budget some credence.

    Here’s my point:

    If vols for these basic materials are trading so high there should be no way in the world they ought to be taking such risk if the possibility of a sudden drop means the budget deficit could very easily dump down to 10% deficit (like the UK’s).

    ……

    Hey Homer you audacious twit, if we end up running a deficit of 10% of GDP as a result of their fuckup, generational accounting, or “structreal” deficits are freaking moot, you loon, as all we’d be doing then is trying to plug 1,000 holes.

  21. Butterfield, Bloomfield & Bishop

    Yeah Marky the OECD, IMF world Bank every treasury in the WEstern world all use it.

    Everyone is wrong but Marky is right again in spite of the figures confirming it.

    What Tsunami is this exactly and you still haven’t said why the tsunami is going to affect us more than other nations.

    Oh on commodity prices.

    perhaps a Read of the SOMP would help.

    no even if the GFC hit again it wouldn’t get to 10% because the structural deficit is much lower than most other nations and is finite which few other nations can boast about!
    you are such idiot.
    Getting so wrong last year didn’t matter you have to regurgitate the same old crap again

  22. Well hey let me just say I respect the Treasury employees and they are eminently qualified. They even turn into fine citizens like John Humphreys.

    Rudd and Swan basically bullied Henry into going along with their BS.

    You can get the Treasury macro model, but Government modelling of late has been kept under wraps. It’s terribly deceitful and revserses the roles of a servant politician and master public exercising their authority through a permament public service.

    I’m starting to think the main role of the Treasury should be farmed out like the RBA and the political crap should be a political office like the DPMC.

  23. So Homer what is the sensitivity of our exchange rate to commodity prices (which are USD denominated anyway – and mining has only ever made up 7% of total output)? Our dollar moves (roughly) 5% for every 1% of US interest rate change. Commodity prices halved and the exchange rate dropped about 30%.

    Doofus.

  24. Butterfield, Bloomfield & Bishop

    Marky go and read the RBS data and then come back and tell us why you are wrong.

  25. JC

    Yes perhaps you’re right that they were bullied but should still be respected, however that still leaves the question unanswered about what to do to prevent a politicization of the Treasury seeing that’s becoming more evident by each passing day.

    ….but Government modelling of late has been kept under wraps. It’s terribly deceitful and revserses the roles of a servant politician and master public exercising their authority through a permament public service.

    Really? Jeez Louise.

  26. “Marky go and read the RBS data and then come back and tell us why you are wrong.”

    Fuck off Homer. I know what I’m talking about and I know I’m right. Time for you to produce some evidence.

  27. Butterfield, Bloomfield & Bishop

    hang on commodity prices can be measured in $US, $ A or SDRs wow Marky wrong again. He knows what he is talking about

  28. Butterfield, Bloomfield & Bishop

    Actually it could be worse Treasury be as accurate as people at Catallaxy

  29. I do know what I’m talking about Homer. If you can’t understand that US monetary policy affects both the exchange rate and USD denominated commodity markets, you’re as thick as pigshit. Now man up and produce some evidence to the contrary from the “RBS” as you call it or pack it in.

  30. Butterfield, Bloomfield & Bishop

    Marky YOU said you could only get commodity prices in $US.
    WRONG.

    Oh dear the $A can’t be explained mainly by the rise and fall and then rise of commodity prices.

    Yeah Marky

  31. “Marky YOU said you could only get commodity prices in $US.
    WRONG.”

    No dickhead, I said they were denominated in USD in the market.

    “Oh dear the $A can’t be explained mainly by the rise and fall and then rise of commodity prices.”

    FFS I’ll spell it out for you again:

    “#

    So Homer what is the sensitivity of our exchange rate to commodity prices (which are USD denominated anyway – and mining has only ever made up 7% of total output)? Our dollar moves (roughly) 5% for every 1% of US interest rate change. Commodity prices halved and the exchange rate dropped about 30%.

    Doofus.”

    But the “RBS” says so – Homer can’t even link to it or reference it however.

    Muppert.

  32. JC

    Homer:

    Seriously enough is enough.

    Look doofus, commodity prices are not denominated in A$ and never have been.

    Commodity prices are priced in US$.

    The balance sheets of our largest exporters are denominated in US$ you complete loon.

    Go away and get back behind the garage.

  33. Butterfield, Bloomfield & Bishop

    Marky finds it hard to understand the workings of RBA data.

    It has been there since time immemorial old son.

    you are confusing commercial data with actual data

    It doesn’t matter that the can be denominated in $US they can be measured in $A, %US or SDRS.
    most people look at the SDRs at the best way.

    And most people look at the TWI as well.

  34. JC

    What is your point, you loon? What freaking point are you trying to make about how people look a commodity prices?

    You can look at them against gold too or silver or copper or in terms of the Dow and S&P.

    What the fuck are you trying to convey here.

    Go away.

  35. “Marky finds it hard to understand the workings of RBA data.”

    When you call it the Royal Bank of Scotland and your rebuttal gainsays your argument, yes. You have the intelligence of a frigging cuttlefish.

    Here’s the thing: I supplied what the sensitivies are. Homer says “look at what the RBA has done”. No need. They would be remarkably similar to what I found.

  36. Butterfield, Bloomfield & Bishop

    You two confuse the money companies get for the commodity prices we examine.
    Most people who look at exchange rates and commodity prices use the RBA commodity price indices.

    Oh yeah our interest rate differential rises at the same time too.

    guess why

  37. JC: Homer disputes this:

    “So Homer what is the sensitivity of our exchange rate to commodity prices (which are USD denominated anyway – and mining has only ever made up 7% of total output)? Our dollar moves (roughly) 5% for every 1% of US interest rate change. Commodity prices halved and the exchange rate dropped about 30%.”

    He thinks commodity prices affect our FX rate more than US macro and Australian macro policy. Commodity prices affect trade volumes and investment more than they do prices – given our exports have low exchnage rate pass through.

    He’s a doofus alright.

  38. “You two confuse the money companies get for the commodity prices we examine.”

    It’s amazing isn’t, I explain in detail Homer’s stupidity and he demonstrates it again without any coordination.

    Thanks for your timely contribution.

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