Budget lie

Page 9 of Budget Statement 3 states

The Government is delivering the return to surplus through its ongoing commitment to the fiscal strategy and the implementation of the most rapid fiscal consolidation in the 44 years for which data are available.

This is false.
Apart from the fact that it treats as past tense something in the future, the Government has by no means ‘implemented’ or even planned a rapid fiscal consolidation. It has not planned a fiscal consolidation: the policy decisions taken by the Government modestly detract from the Budget bottom line.
The OECD’s glossary of statistical terms defines a fiscal consolidation as

Fiscal consolidation is a policy aimed at reducing government deficits and debt accumulation

The Government instead is relying on parameter variations. Table 5 in Budget Statement 3, shows that the policy decisions of the Government:

  • Detract from the budget bottom line by $1.9 billion in 2010-11
  • Detract from the budget bottom line by $2.559 billion in 2011-12
  • Add to the budget bottom line by $1.95 billion in 2012-13
  • Add to the budget bottom line by $1.345 billion in 2013-14.

Crucially the main positive effects from these policy decisions relates to revenue decisions – tax increases are treated as savings.
This is like a company producing savings by increasing its price.
Or a department creating savings by having its appropriations increased.
But one other thing seems to have slipped by notice. And that appears in Budget Statement 6 – the reconciliation table for expenses (see below). As can be seen, policy decisions taken by the Government have increased expenditure in every year except 2012-13 where net expenditure was cut by a mere $119 million.
Look at the reduction in GST payments to the States – this seems to me a fiddle designed to make it appear that payments increase by less than 2 per cent. I do not think that this is credible: do we really expect that GST receipts over the next few years will remain so low when there is forecast to be a bounce in company profits and sales?
The massive fiscal consolidation is a fiction.
That the Government is loose with words by claiming parameter variations as policy intent is one thing. For Treasury to tolerate that claim in the budget papers is unacceptable.
Finally, notice the “other variations” in 2010-11 of $4.981 billion. What is hidden there? Doesn’t it seem odd for an “other” category to contain such a proportionately large figure?

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7 Responses to Budget lie

  1. Samuel J

    Thanks Stephen – get away with it once and then it becomes normal?

  2. Exactly right Sam. This people are incorrigibly shameless.

  3. This is the first time in my working life that I have purposely disregarded a Commonwealth budget, simply because I have zero confidence in the government’s ability to tell the truth. I don’t believe a single forecast that they have produced.
    I’ve simply stopped listening. They are a joke.

  4. Johno

    The once proud and competent Commonwealth Treasury has been dealt a serious blow by having such an appalling Minister. I know of State Treasury officials who can’t believe how bad the Cwth Treasury has become since Swan took over. Abbott’s Treasuer will have a very important task when they take office of restoring Treasury’s authority.

  5. Pingback: No, George at Catallaxy Files

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