Don’t be a MYEFO Wayne
Warren Buffett once said that only when the tide goes out do you discover who’s been swimming naked. The tide is certainly going out on the Gillard government, but that doesn’t stop them from trying every trick in the book to delay everything from being revealed.
At a time when budget honesty is desperately needed there is strong speculation Labor is going to rush out its Mid Year Economic and Fiscal Outlook (MYEFO) weeks earlier than normal perhaps even as soon as Monday.
If Labor is to release the budget update next week it will be for the most cynical of reasons. It will allow them to avoid factoring in additional economic data due in late October which is tipped to show declining revenues. Of the past 14 MYEFOs only two have been released in October and that was in advance of November elections.
Labor is desperate to keep its ‘cook the books’ $1.5 billion surplus projection for 2012-13 alive for as long as possible, never mind the real track record of the four biggest deficits in history totalling $173 billion.
The first quarterly payments of the government’s shambolic mining tax are also not due until Monday so a release next week would allow the government to continue to book near the full proceeds - $13.4 billion over the forward estimates – without having to reveal the actual revenue figures.
Everybody knows there is no way known the mining tax will raise anywhere near what the government claims it will, yet it already has all of the money spent. In fact it has been reported that only the two biggest miners will pay anything, not because they have a liability, but effectively out of sympathy because of their role in brokering the deal!
In recent months there have been big falls in iron ore and coal prices hitting the terms of trade (ToT). In May a fall in the ToT of 5.75 per cent in 2012-13 was factored into the budget, yet many private economists are predicting much heavier falls, which would cost the budget billions.
The onus is on the government to provide the most up-to-date and believable estimates in regard to the ToT and commodity prices in MYEFO, not more Pollyanna assumptions.
But given the government’s form, MYEFO will no doubt contain more money shuffles and budget fiddles. At budget time the Coalition had already identified at least $8 billion in brazen money shifts designed to artificially inflate the 2012-13 budget bottom line.
They are also raiding every hollow log they can find by carving out ‘special dividends’ from the likes of Medibank Private ($850 million over three years) and there even reports the Reserve Bank has been strong armed into paying a $500 million dividend from last year’s profits to be booked in the budget this year.
The government also plans to change the long-standing accounting treatment of costs associated with Future Fund investments, to help meet the Commonwealth’s future superannuation liabilities, which surprise, surprise would improve this year’s budget bottom line by $417 million.
In addition $5.8 billion in borrowing for the loss making NBN Co is being kept off the budget bottom line, and while Labor claims it is tightening the belt and returning to surplus debt continues to increase. In the 2011-12 budget Labor said net debt would reach $106.6 billion yet the actual figure is now $147.3 billion – a $40 billion blow-out.
The biggest MYEFO test for Labor will be to outline how it intends to fund a $120 billion black hole of unfunded future budget liabilities without imposing new taxes and further ratcheting up debt.
Senate Estimates revealed this week, for instance, that the government is not committed to funding the National Disability Insurance Scheme, beyond the $1 billion allocated for the initial trials, whereas the full program is likely to cost around $10.5 billion per year. This hasn’t stopped the government claiming political mileage from the impression it is fully committed.
Wayne Swan gets hysterical when ever his budget black hole is mentioned, but Macroeconomics budget policy director Stephen Anthony said: “There is a hole, fill it and by the way, stop raising spending promises you can’t keep.”
Not only is the tide going out but storm clouds remain on the horizon and the government has a responsibility in MYEFO to deliver some budget honesty not another cynical political document.
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