Swan looking for cuts that are too little, too late
Here’s one number you won’t hear Wayne Swan spruiking: $173,315,000,000. That’s the amount of red ink officially booked by the federal Treasurer for his first four Budgets.
Since inheriting a surplus of almost $20 billion from Peter Costello, Swan has handed down four of the biggest Budget deficits on record - $27 billion, $54.8 billion, $47.7 billion and this week the final accounts were released for last financial year showing another deficit of $43.7 billion.
Yet the government members were congratulating themselves when Swan and Finance Minister Penny Wong announced that the latest figure wasn’t quite as bad as the $44.4 billion predicted just five months ago. Never mind that Swan had originally said it would be only a $22 billion deficit - you have to search through the ghosts of Budgets past to find that long abandoned number.
Labor is living off its reputation for saving Australia from recession during the global financial crisis. The trail of deficits was the price to pay for the combined effect of a massive $150 billion wiped from revenue and the decision to pump $50 billion-plus into the economy to stimulate activity and protect jobs. There’s no regrets from Swan as Australia’s economy has emerged with low inflation, more jobs and in better overall shape than comparable countries.
But the deficit still haunts him. Costello had 10 surpluses in 12 years. A Labor government has not delivered one since Paul Keating in 1989-90.
Swan says his next Budget - the all-important pre-election accounts - will deliver a $1.5 billion surplus. It’s an audacious quest requiring the biggest-ever one-year turnaround of $45 billion! He needs all to go right but already has been forced to admit that commodity prices have tumbled more than Treasury had expected.
Swan concedes that “will hit government revenues significantly” and means it will be “harder to deliver a Budget surplus”.
Having chained Labor’s credibility to the precious promise of a surplus in 2012-13, Swan and Julia Gillard are now gearing up for a pre-Christmas mini-Budget to make more spending cuts to keep the pledge on track.
Swan would have you believe he is a master surgeon armed with the smallest scalpel, who will barely make a scratch as he responsibly removes unwanted fat from the Budget. Trust me, it will hardly hurt a bit, he says, and it will be coated in a fiscal anaesthetic of “Labor values”.
His opponents portray him as a mad butcher wielding a bloody and rusted machete that will inflict untold debt and deficit that will add to cost of living pressures.
Treasury Secretary Martin Parkinson is screaming out that for years to come whoever is in government will be around $20 billion a year short of what it used to get. It can no longer be seen as a surprise to the Government that it has less money to spend. So why is the Government on a multi-billion-dollar spending spree that it cannot pay for without inflicting pain somewhere else?
A recent improvement in opinion polls has created some hope in Labor ranks that Julia Gillard might somehow pull off an amazing victory, but some ministers still believe the most likely result is they will lose. They say what time they have left should be about building legacies - even if it’s all on the credit card.
Labor is talking up big, bold ideas, or crusades as Gillard calls her education plan, but trying to dodge conversation about how much it will cost and where the money will come from. It wants cash-strapped states to chip in.
The price tags are huge. The long overdue National Disability Insurance Scheme could cost an extra $8 to $10 billion a year when fully operational and the education boost around $6.5 billion. Labor is likely to allocate small spending in the next couple of years, with the big bucks to come down the track, leaving lots of unexploded fiscal time bombs. (Tony Abbott has just as big - if not bigger - questions over how he would make his Budget add up.)
Swan boasts he has already found savings worth $100 billion through a combination of cuts and increased taxes over five Budgets and will find more if needed. Well, if it’s really that easy, why didn’t he cut it already and have smaller deficits?
Wong has started the next round of cuts by announcing hopes to claw back $550 million over four years from the public service without hurting jobs by slashing business-class and international air travel for bureaucrats, reducing the use of consultants and publishing some reports only online.
But that won’t even match the $876 million slump in company tax receipts in the seven weeks between handing down the Budget on May 8 and the June 30 end of the financial year. Lower company profits are going to mean even more write-downs in company tax. There’s concern that after all the political pain, the mining tax won’t reap the $3 billion already counted in the Budget - and spent.
Gillard is preparing the way for unpopular cuts: if you sign on to her crusade you have to wear her choice about how to pay for it.
A further crackdown on superannuation tax breaks, maybe more means testing, abolishing mining fuel concessions, more Defence cuts and tightening grants and research funding will be among options before the razor gang searching for a surplus at any cost.
Phillip Hudson is Herald Sun national political editor.
Comments on this post will close at 8pm AEST.
Read all about it
Up to the minute Twitter chatter
The latest and greatest
Good morning Punchers. After four years of excellent fun and great conversation, this is the final post…
I have had some close calls, one that involved what looked to me like an AK47 pointed my way, followed…
In a world in which there are still people who subscribe to the vile notion that certain victims of sexual…