This morning Rod Sims – head of the ACCC – had an op-ed in the AFR. This comment jumped out at me:
Second, Australian governments usually spend the inflated tax revenue as the money comes in. Prior to our current run of budget deficits Australia ran budget surpluses due to high commodity price inflated revenues. These surpluses, however, were usually structural budget deficits; that is, once you substitute more normal commodity prices for the then current abnormally high commodity prices, our budget was actually in deficit.
Hmmmmmm. The nice thing is that statement can be easily checked. The RBA has commodity price data. So I thought I’d plot the Index of commodity prices (All items; US$).
Well that story might explain the last three years of the Howard era, but I’m not convinced that Sim’s story stands up to much scrutiny.
Update: Same graph now in A$.
Somehow “blaming” the Howard era budget surpluses on the mining boom still doesn’t work.