Debt and deficits again

Milton von Smith and I have been having a look at the new ALP website on the economy.

The ALP make this claim.

The Federal Labor Government’s responsible economic management means Australia’s national budget will return to surplus in three years time and three years ahead of schedule. That’s despite the fact the global recession stripped about $110 billion from government revenue over five years.

So we’re invited to believe that the debt and deficits are something that just happened – no mention of all the reckless spending.

Milton von Smith has trawled through the budget papers and tabulated all the increased spending decisions made by the ‘this reckless spending must stop’ Rudd-Gillard government.

That looks like a massive increase in spending to me.

In the absence of Rudd and Gillard’s reckless spending decisions, the 2010-11 deficit would be $26.3 billion smaller – and that is not including spending programs that have been allowed to blow out due to lack of ministerial oversight. This would have been the lower bound of the starting point under a Coalition for the 2010-11 Budget.

The figures also show that that since coming to office, Rudd and Gillard took decisions to increase spending by a total of $113.6 billion between 2008-09 and 2011-12.

I did a slightly different exercise – looking at how well the Rudd-Gillard government did by their own standards. It has handed down three budgets and so we can look at performance in two. In the 2008-9 budget the government forecast a surplus of $21,703 million and delivered a deficit of $32,114 million. The differential is explained by policy decisions (an increase in spending) of $33,384 million and parameter variations of $20,433 million. So factors that include unexpected drops in revenue and changes in forecast factors and so on, did not explain the full change in budget position.

In the 2009-10 budget the Rudd-Gillard government forecast a deficit of $57,593 million and delivered a deficit of $57,079 million. That looks good – they did better than expected, until you look at the detail. That difference is explained by increased spending of $2,640 million (policy decisions) and then offsetting parameter variations of $3,153 million. So the budget performed better because the world wasn’t as bad as they had first thought it would be.

That is the story here. Spending has driven the budget into deficit. As Lenore Taylor and David Uren have argued.

The government and Treasury had expected collapsing businesses to drag the economy into a long recession, but instead the shock caused by the collapse in world trade and the panic in financial markets passed after a few months, leaving the corporate sector largely intact. The government was left completing large stimulus projects that were no longer really needed.

If the government had left monetary policy and the automatic stabilisers to do the heavy lifting our budget would be a much better shape.

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16 Responses to Debt and deficits again

  1. Butterfield, Bloomfeld % Bishop

    Sinkers go to a high school class in economics and get the teacher to talk about automatic stabilisers.

    They both increase spending and reduce tax revenues.

    A person with just a simple understanding of fiscal policy would go to the Structural deficit and then take out that part affected by the economy. Then you have the government spending decisions that have been deliberate decisions..

    Oh yes,

    The budget is coming back into the black far earlier than you or anyone here thought possible.

    One of the reasons is that the economy is much stronger thanks to the stimulus.

    Just for a laugh can you or anyone tell us what part of the Deficit this financial year is due to the Stimulus?

    just leave it to monetary policy and automatic stabilisers eh. Hang on only one part of the interest rate sensitive secotr really grew contrary to history.

    Oh dear and poor old Sinkers doesn’t understand how much the defcit would have been with automatic stabilisers.
    Glenn has said he did not want interest rates around 1% as well.

    Well the second last budget gives you a hint. you know that one, that’s the one you got so dreadfully wrong

  2. JC

    One of the reasons is that the economy is much stronger thanks to the stimulus.

    1 + 1 = 15

  3. Andrew Reynolds

    JC,
    Only if the multiplier is 7.5
    🙂

  4. jtfsoon

    fOrRest

    you were not even aware that Leyland Brothers defaulted and remember Ireland and the baldic countries followed your prescriptions and theuir monetary policies were impertent!!

    I woul as k you too do some reading but than this is catallaxxy!

    >>>>
    end Homer channeling

  5. Butterfield, Bloomfeld % Bishop

    yes kiddies what part of this year’s deficit is due to the Stimulus?

    Just love lowering interest rates which only affects first home buyers.

    wow

  6. JC

    you were not even aware that Leyland Brothers defaulted

    Homer, which leyland bros. The dudes that did all those specials of the British car maker?

    I have no idea what the hell you’re getting at, you dill.

    and remember Ireland and the baldic countries followed your prescriptions and theuir monetary policies were impertent!!

    Your stupidity is impertinent homer. I find your lying and stupidity truly offensive.

    I woul as k you too do some reading but than this is catallaxxy!

    I’d ask you to stop reading because it’s obviously doesn’t help. And stop lifting the Krugs junk too. think up your own stupid ideas instead of relying on his stupid ideas.

  7. JC

    Oh I was caught again. Sorry I thought that was Homer.

    ——————–

    This year’s deficit is a combination of egregious spending and the stimulus, homer. I guess they’ve increased the strucreal deficit, hey?

    No homer lowering interest rates does NOT just affect new homer buyers, you economic illiterate nimbus.

    And again, stop lifting stuff from the Krug- pretending it’s your own stupid junk, when it really belongs to him. For goodness sake, you’re fully “capable” of thinking up your own dense, ill thought out dumb ideas than having to rely on that idiot.

  8. JC

    Homer:

    Trust what i say.

    You’re untalented enough to arrive at at stupidest conclusions imaginable without having to lift other people’s junk. In fact as the worst economist in the country I have 100% confidence that you won’t ever let us down, Homer.

    Just make it your own. Please Homes..

  9. Butterfield, Bloomfeld % Bishop

    Fancy finding Forrest so badly wrong.
    Indeed he is soo wrong one would have thought it was Sinkers.

    gosh isn’t it funny how all the ‘concerned’ people here about deficits and debt never ever talk about the countries with the worst records.

  10. JC

    gosh isn’t it funny how all the ‘concerned’ people here about deficits and debt never ever talk about the countries with the worst records.

    You mean a worst record because we didn’t accumulate debt for 11 years while Howard was in? You mean the $80 billion the previous government stupidly accumulated that let these clowns fritter away on pink batts and school dunnies.

    You village idiot Homer.

  11. jtfsoon

    forest
    which countries have biggger deafisits hint it aint the ones that pump primed!!

    hireland and the baltic followed your says law and look where it got them in the red

    giggles and walrus already shewed that 33,000 lives were saved because the batts reduced net fires but you would need to read to know that

    tjhis aint reality soon its catallazy!

    >>>

    end Homer channeling

  12. JC

    which countries have biggger deafisits hint it aint the ones that pump primed!!

    What a simplistic way of analyzing this stuff, homer, you imbecile.

    You require more insight than that shallow finding, you mental retard.

    hireland and the baltic followed your says law and look where it got them in the red

    Says law also Says you’re an idiot.

    giggles and walrus already shewed that 33,000 lives were saved because the batts reduced net fires but you would need to read to know that

    I agreed with you , giggles and walrus, remember. In fact I said we should have a permanent pink batts program going into perpetuity because it reduced fires.

    Go away, homer.

  13. sdfc

    You need to bone up on plodder economics Homer.

    The government went into stimulus because it was concerned that the economy would go into recession. The economy didn’t go into recession (technical anyway) so ergo the stimulus was a waste. You really do need to understand these circular arguments if you are going to comment on this site.

    You also have to realise that running huge surpluses during a terms of trade boom was the work of genius economic managers. Apparently the windfall tax revenues were the result of Howard government policy driving up commodity prices.

    I hope you get it now.

  14. entropy

    I find there are a lot of threads on catallaxy I would like to follow and even have something to say but often I just couldn’t be bothered because of a certain commenter.

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