Labor’s recovery plan is simple and unexciting: delivering an unlikely Budget surplus.

This porpoise serves little purpose, except to save us posting an image of a certain sourpuss. Pic: Kelly Barnes

Yet with a primary vote languishing in the mid-to-high 20 per cent range, this rather abstract financial goal is now the whole game - the political rock around which all else will be anchored.

The strategy assumes two inter-related things: first that Ms Gillard can hang on to the leadership and second, that an election is still 16 to 18 months away.

Belief in the leader and in the timetable is fundamental. The PM’s advisers know that ensuring caucus members remain convinced of both is their first challenge. And it is no small trick, potentially facing derailment with every crisis that comes along.

Already there are reports of key backers walking away and of others preparing to do so. Her former close confidant, key number counter and current Chief Whip Joel Fitzgibbon is the latest and most symbolic departure.

There is no disputing it has been a horror-week for the Prime Minister since she returned from abroad to take control of the unravelling scandals dragging her government down.

After years of defending her besieged backbencher MP Craig Thomson against unsubstantiated claims of credit card abuse as a union official, she has finally cut him adrift. It was a belated recognition that her prime ministerial shield amounted to guilt by association.

Lancing the other boil made sense as well which is why she forced Peter Slipper’s hand.

Importantly both men get to keep their jobs which in the Speaker’s case allows him to pocket a $323,000 salary merely for kicking gravel around on the parliamentary driveway.

As another about-face it did not come cheap for Ms Gillard bringing renewed criticism of her judgment and consistency.

But it pre-empted by just days police investigations into both Mr Thomson’s former union and Mr Slipper’s Cabcharge usage.

It was a rare piece of good fortune even if the real aim was to clear the decks for this Budget.

Never has so much hinged on the naked symbolism of getting to surplus rather than falling just short. Economically the difference means little but this is a self-imposed political benchmark and not an unimportant one.

In a strange reversal of stereotypes, economists and business leaders normally as wedded to surpluses as to labour-market flexibility, have been cautioning against a rushed return to balance for fear of exacerbating the forces pressing down on growth.

From the left, the Greens and independents have also questioned the impacts of a sharp fiscal consolidation.

Yet Labor has stuck to its guns and will outline a projected surplus for 2012-13.

Already the first dividend of this approach has been paid courtesy of this week’s cash rate cut of half a percentage point. More will likely follow.

The plan is to achieve the holy grail of low interest rates, low unemployment and low inflation while running a balanced Budget.

And it could work. According to Labor’s focus group testing, voters rate the idea of a surplus.

What they do not rate so highly are unprovable claims of recessions dodged and glowing international comparisons. In other words, Labor’s entire and largely ineffective argument to now.

It is a political lesson that has been hard-won.

Having spent the accumulated billions in stimulus after coming to power, Labor is exposed to the Opposition charge that it has never delivered a surplus.

It has created a compound problem in voterland described by Ms Gillard’s insiders as “a counter-intuitive on top of a counter factual’‘.

The counter-intuitive is the Keynesian part - the idea of spending your way out of economic difficulty. That it works for economies is one thing but it is the opposite of people’s personal experience. So Labor got no ticks when it did this whatever its effectiveness.

Then came the claim that the Government had saved people from job losses which by definition they never experienced. The counter-factual.

It is a recognition that has driven a new focus on the domestic economy and the lived experience of voters.

Julia Gillard knows the path to victory is narrow, but she believes it is there. She can afford no more slips along the way.

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    • Dr B S Goh, says:

      05:52am | 04/05/12

      Two ways to reduce budget costs worry me. Firstly Defence get chopped for $4 billions. Secondly single mothers will be required to go back to work early to save $700m.

      I think the Govt should stopped ALL boatpeople to save XX billions. This action will furthermore also get votes for ALP.

    • Nathan says:

      06:29am | 04/05/12

      You want to stop boat people/asylum seekers? Shows how narrow minded people are because many more illegal immigrants come through airports than any other way and they cost us much more. Boat people what an easy political target when there are far greater immigration issues

      If we start thinking that we don’t have an obligation to asylum seekers that is disgraceful enough but secondly we should never have a single Australian soldier posted overseas. I wonder why people from Afghanistan are trying to escape?

    • nihonin says:

      06:45am | 04/05/12

      ‘Secondly single mothers will be required to go back to work early to save $700m.’

      Yet the government are going to pay people to house the ‘invading hordes’ and still maintain Christmas Island and the other ‘hostels’ setup to house the incoming passengers on the boats.  To me it seems like they are putting money aside as they have no idea how or what to do to stem the problem they have created.  I still find it laughable it’s the Liberals fault, when the government can’t get legislation passed, but were able to legislate the CT without any votes from the opposition.

    • cheap white trash says:

      06:52am | 04/05/12

      Yes but that wont happen,stopping the boats means stopping future Labor Party Voters,and we can’t have that now can we…

    • Dr B S Goh, Australian in Asia says:

      07:24am | 04/05/12

      @ Nathan.

      Stopping the boatpeople is a matter of survival for Australia.

      Out here in Asia there is a universal thinking that Australia welcomes boatpeople.

      In my opinion, the greatest threat to Australia is the looming critical food shortage will will occur in the lifetime of majority of Australians and will take place sometime between 2040 to 2060.

      If we do not now destroy this universal understanding in Asia that Australia welcomes boatpeople then Australia is at risk of being swamped by a tsunami of millions of boatpeople.

      For your information India had a census last year and reported that it had an increase of 180,000,000 people in the last TEN years.

      As for illegal arrivals by planes at least they have ID papers and there is no difficulties to deport them.

    • Bev says:

      07:49am | 04/05/12

      nihonin says:07:45am | 04/05/12

      ‘Secondly single mothers will be required to go back to work early to save $700m.’

      When their youngest child reaches 8. I don’t consider that early.

      They are also going to cut benefits for welfare recipients if you travel overseas for more than 6 weeks.  That includes family tax benefit part A and B (middle class welfare) and utility and telephone allowances (not used while away). 

      On this one I will give Labor a tick.

    • Gerorge says:

      07:57am | 04/05/12

      Nathan your twisted logic just doesn’t fly with the majority view. Alas we can’t deport the likes of you to countries that deserve this crap this early in the morning!

    • marley says:

      08:30am | 04/05/12

      @Nathan - to be fair, the number of boat arrivals in the last few years has been almost as great as the number of air arrivals.  More to the point, the former cost us far more than the latter, because we generally don’t detain air arrivals.

      We do have an obligation to asylum seekers.  The problem is, we manage the process very poorly, and are basically giving every one who arrives by boat the right to Australian residence.  Some of them simply are not entitled to it.  .  I think most Australians will live, albeit grumpily, with genuine refugees arriving by boat, but not with the current situation in which some of those arriving are manifestly economic opportunists. We need to put some backbone and integrity back into the refugee determination process to stop that from continuing.

    • Emmy says:

      08:30am | 04/05/12

      @Dr B S Goh 8 24am I agree with you but MsGillard must have had a premonition of what you have just said about food shortage or you are her advisor. We are not going to just feed ourselves but we are going to feed all of Asia. Maybe she had a premonition that her boat people policy will lead to what you say. Lets hope she gets the Murray Darling issues fixed quick smart

    • thatmosis says:

      10:08am | 04/05/12

      nihonin, what I would like to know is where these thousands of jobs are going to come from. Is Swann going to wave his magic wand and hey presto there are jobs for all those single mothers. There arent enough jobs now and we are supposed to believe that single mums will immediately get jobs and save the almost Government millions. Well heres another, “once upon a time there was this…...................

    • nihonin says:

      01:52pm | 04/05/12

      ‘Well heres another, “once upon a time there was this…...................

      ......................... The End

      Pretty much how history will possibly view the current government.

    • Little Joe says:

      10:37pm | 04/05/12

      @ Dr B S Goh,

      Yes there will be a massive food shortage ..... as I have explained on previous posts to mantain our current food production systems we require a chemical often referred to as “Superphosphate”.

      In approximately 40-years time there will be a economic crisis as a result of PEAK PHOSPHATE where literally all the “easy phosphate” will have been mined. As a result there will be lower quantity of more expensive fertilisers and a massive food shortage ..... mass starvation!!!

      This will happen before Peak Oil.

      Ps. BHP have already identified this problem and are ramping up Phosphorus Exploration Projects

    • Dr B S Goh, Australian in Asia says:

      07:31pm | 05/05/12

      @ Little Joe

      Thanks for pointing this out. Now I understand why BHP invested in phosphate.

      The Greens in Australia under Dr B Brown and Gang have made a very serious strategic error by imposing the carbon tax on Australia. Now 70% or more of Australians are turned off Environmental Issues and for nothing as the carbon tax in Australia is totally insignificant.

      I wish they have focused on global population growth and demanded than our foreign aid is for only one purpose. It is given to developing countries which want to reduce population.

      The Greens should champion China’s one child policy the only proven method to reduce population growth in developing countries.

    • Nathan says:

      06:05am | 04/05/12

      I have read enough comments on here to know exactly why they are obsessed with a surplus. Constant unfounded remarks questioning the strength of the Australian economy and people seeming to believe that a surplus automatically = a strong economy.

    • Rocksteady says:

      09:30am | 04/05/12

      That’s the problem with economics in politics, its aimed at idiots who don’t have a clue. They equate low interest rates with a good economy when it really means the RBA is trying to stimulate growth.

      This whole ideology of getting a budget surplus to be good economic managers is completely absurd. I’m very impressed with the Liberals who have come out and said so, rather than just tow the party line which is squarely aimed at impressing the economically illiterate.
      A good government will pick up the slack and spend when the private sector is slowing down and vice versa.

    • M says:

      12:02pm | 04/05/12

      So why doesn’t the media (hello, punch?) outline some basic economic concepts in laymans terms to give the average punter a better understanding?

    • glenm says:

      01:19pm | 04/05/12

      @ Rocksteady ,  Your statement should be clarified with “a good government needs to spend “on essential infrastructure to improve productivity” in a downturn. Not spend on $900 bonus cheques, shody insulation programs and school halls.

    • GigaStar says:

      01:35pm | 04/05/12

      M says:01:02pm | 04/05/12 “So why doesn’t the media (hello, punch?) outline some basic economic concepts in laymans terms to give the average punter a better understanding?”

      Because economics as a science is too complicated - even with basic concepts laymen still wouldn’t really know what was going on.

    • M says:

      02:52pm | 04/05/12

      It’s not that hard to explain surplus doesn’t mean good, and that deficit doesn’t mean bad.

    • Nathan says:

      12:27am | 05/05/12

      Totally agree with the education roll the media could play

    • Nic says:

      06:20am | 04/05/12

      The frustrating bit is that the dodged recession *should* rate with voters. The measures may have been hasty and a little less than efficient in some cases, but they worked. If only people could see the alternative universe in which we too had a recession they might care a little more. Alas, the CSIRO is yet to figure how to do that out.

    • Against the Man says:

      06:37am | 04/05/12

      Like I said yesterday only Labor can make a surplus bad news. Enjoy the cuts and enjoy the last days of the ALP. This is sweeter than sweet on the sweetest day wink

    • sunny says:

      09:58am | 04/05/12

      I reckon the surplus is good news. People whine about the Labor government ad nauseam, and sure they have some political issues, but their ability to maintain a strong economy is proven. I reckon in the quite confines of the polling booth a lot of people will wonder if it’s wise to throw out good economic management and replace them with bad.

    • JTZ says:

      10:46am | 04/05/12

      @sunny so are the massive gaps in defence that are going to occur due to the surplus.

      I hope you realise that every nation that surrounds Oz apart from NZ are increasing thier spending.

      By the time we recieve the JSF India and China will have 1500+ fighter and multi role aircraft. These include the J20 and the SU50. Both of which can smash our Super Hornets as they are full 5th Generation fighters. Singapore will have its JSF delivered on time and also has the F15 Strike Eagle. Malaysia will be increasing its SU30 fleet and the fact that India and Russia will have 250 SU50 for international sale I am sure Malaysia will buy some. So you be happy about the surplus and be happy as the norm with Labor it will be coming out of defence.

      Note: Labor is making the same mistake with the new subs as it did with the Collins. You can not intergrate European subs with US Software. It took a crap load of time to fix this on th Collins and Labor is making the same mistake.

    • Aussie says:

      11:04am | 04/05/12

      Do you even understand how they are going to reach this ‘smoke and mirrors’ surplus???
      Its fools like you that got us this Labor circus, but fortunately you are now in the minority(29% approx). But stick to your reckoning at the next polls if it helps you sleep at night.

    • Little Joe says:

      11:40pm | 04/05/12

      @ Sunny

      You do realise that Swan’s first two surpluses in the 2011-12 MYEFO Budget increased debt.

      They know how to fool the ignorant!!

    • sunny says:

      08:52pm | 05/05/12

      @Aussie ‘smoke and mirrors’ - Labor is only playing by the rules that the Libs / Costello defined. And Queensland gets their $1Billion flood recovery money before start of next FY as a result.

      @Little Joe - Australia’s public debt is about 6% GDP. the avg. western economy’s public debt is up near 100% GDP.

    • cheap white trash says:

      06:41am | 04/05/12

      Surplus circus serves a purpose, on the surface,yeah right and pigs Might Fly,

      LOL more smoke and mirrors,from a Government that couldn,t organize a piss-up in a brewery,And it could work. According to Labor’s focus group testing, and there,s the Problem,a Labor Party Focus Group….What a joke,who are they?
      More of the Latte sipping Lefties,and Academic Green Elitists i guess…
      Julia Gillard knows the path to victory is narrow, but she believes it is there,lol
      and she also believes that the Carbon Tax will save the world from GW and CC,
      and that tells you alot about our Dear Leader…........utterly HOPELESS.

    • Sam says:

      07:15am | 04/05/12

      A surplus is a good thing, Im convinced most people seem to think otherwise cause hey, another reason to attack Gillard. Can you imagine what would happen if they failed to meet one? Abbott would have a field day, in this since he’s somehow cleverly constructed a ‘win-win’, no matter what happens, which i disagree with.
      BUT the manner in obtaining a surplus matters. So much middle class unneeded welfare still exists and can go, in the mean time, delaying some jets to save $2B to me seems pretty stupid (going to have to buy them next year??) We could use them now.
      Just one example there and I think we’ll see a lot of silly cuts and things like that but no touching the sacred welfare system

    • thatmosis says:

      07:47am | 04/05/12

      A budget surplus from this almost Government will be a smoke ans mirrors budget where although they might crow about it actually means that a lot of spending has either been put on the back burner or completely lost.   
        Nobody who can think for themselves, and this surely excludes the author, believes for a minute that this budget is the result of fiscal management but of shifting deck chairs on the Titanic, an exercise in futility. 
        Most people realise that this almost Government will do anything at this stage to make themselves look good but its like mutton done up to look like lamb and will only fool the gullible and the rusted on Labor supporters. Its a sad state of affairs when a Government is so detested by over 80% pf the people they are supposed to represent.
        More and more we see and hear of those supporters making claims about how good this almost Government is that is not backed up by physical evidence but is condemmed by its own actions as liars, incompetants and wasteful.

    • FINK says:

      08:59am | 04/05/12

      If Labor produce a budget surplus it would be the greatest political fiscal achievement in well over the past 30 years.
      Howard sold the farm to achieve his budget surplus, Howard left nothing for Labor to sell.
      Howard built nothing (except a crappy rail line between 2 crappy cities), Labor are building a future with the NBN, better schools etc etc etc.
      Howard sold farm for his budget surplus, but it looks like Labor have sold their souls to the Greens for theirs.

    • Against the Man says:

      05:15pm | 04/05/12

      Labor losers are a very tiny minority…............I win…............again wink

    • MarkS says:

      09:24am | 04/05/12

      It no longer matters if she makes any slips along the way. Now she is like the last ALP premier of NSW, already one of the walking dead.

      I purchased champagne to toast the expected defeat of the Howard government. I loath & distrust Tony Abbot. But this morning after news of further defence cuts the ALP has lost my vote. I have decided, enough.

      If they have lost people like me this far out, they are done as a burnt chook.

    • Rock Me Now says:

      02:23pm | 04/05/12

      They are in destruction mode. They are creating a mess for the Coalition when they take over. Watch as Miss Gillard seeks revenge on Australia for refusing to support her incompetence.

    • Claudia says:

      09:39am | 04/05/12

      The reason the budget is guaranteed to fail is because the buget cuts actually affect everyday, hard working Aussies! Shame on you Wayne Swan!

    • Steve says:

      11:02am | 04/05/12

      Who else do you think a budget cut would affect? The French? You’re talking outta you’re nose if you think Liberal cuts won’t also affect “everday, hard working Aussies”

    • Anjuli says:

      09:41am | 04/05/12

      They may create a surplus for this year , MAYBE ,then there is the debt which they are borrowing $100 million a day to repay . So tell me how can there really be a surplus.

    • Samantha says:

      09:58am | 04/05/12

      Great question and neither Swan nor any of the ALP supporters on this forum will give you a straight answer. Truth is Australia has been screwed over by a ALP government once again!

    • glenm says:

      01:26pm | 04/05/12

      They wont actually produce a structural surplus, it will be a one off illusion created by delaying spending till latter years. Expect to see a lot of positive announcments in the budget with funding to start in 2013.
      Yes Virginia there is no such thing as a Labor Surplus.

    • SalC says:

      10:25am | 04/05/12

      I dunno, to me the promise of a budget surplus is such an abstract concept to most voters, used to bamboozle us into believing all these budget cuts are necessary.  Why stand so steadfastily on this promise, when all others have been so insultingly renegged?

    • Chris Topher says:

      10:37am | 04/05/12

      How is ripping 40 billion out of the economy, which is going to be seen by a lot of people as Labor fixing it’s own economic incompetence and waste, going to be a vote winner?

      This government seriously is going to need the jaws of life to remove it’s head from our of it’s own arse.

    • Max Power says:

      11:09am | 04/05/12

      I am far from a Labor voter, but, any cutbacks to middle class welfare is a welcome thing. ALP are sunk anyway, they should scrap the Baby Bonus whilst they’re at it and all the other middle class welfare.

    • off centre says:

      01:51pm | 04/05/12

      Agreed. The ALP is finished. If they truly wished to go out with a bang, they would drop all middle class welfare and call an election. Who knows, such an honourable move could save them a seat or two!

    • Leo says:

      11:15am | 04/05/12

      This surplus is a myth and not worth cutting down tree’s to print the lies.

      They will use an unrealistic growth figure, bring forward revenue and defer expenditure. Things like the NBN will not make an appearance - according to Swann, because its an “Asset” its not an expense. I seem to recall Enron got into trouble with that logic.

      What Swann’s creative accounting will do to the May 2013 budget requires a hungry Lion, a Colosseum and a few Christians to replicate the scenario. So can there be a doubt we will be going to a poll before they have to face another budget ? I think not !!

    • Farken says:

      12:30pm | 04/05/12

      i see it as the labor party spending money where its needed and then the lnp comes in and rips the guts out of everything, leaving people behind the eight ball and over taxing lower income people

    • Reader says:

      12:34pm | 04/05/12

      nd yet Liberal lovers all talk about the NBN like all that money has been spent now. The project is happening over 7 years or something so of course the $44 billion or whatever it is hasn’t all been spent NOW!!!! But you’re whining brethren on talk back constantly carp on about the 50 or 60 (because they must embelish upwards) as if its spent now, ‘oh woe is us, poor us,’. They’re just liars, that’s all. We know how much you hate liars right!??

    • glenm says:

      04:46pm | 04/05/12

      Considering the first government estimate on the NBN was $4 billion in 2007 , the cost under labor has multiplied by a factor of 11. Its not really the libs embelishing upwards that is labors problem ,its the fact they are an incompetent bunch of economically illiterate fools led by a treasurer , who’s work experience was shovelling shit and watching grocery prices.

    • DrTWB says:

      12:55pm | 04/05/12

      So now we find out that the $40 billion turnabout in our fiscal position will in part be achieved through the gutting of the defence budget. Given our small size air power and submarine capability are critical to our long term strategic capability. Otherwise the Northwestern approaches to Australia where substantial oil/gas resources lie are not defendable. And you can forget about power projection into the IO and beyond.

      Disgraceful to the point of treason. What happened to Kevin’s grand plans from 2009?

      Another labor betrayal of our national interest.

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