It doesn’t take long, in election years, before every galah in the pet shop is squawking about economic management.
So let’s get one thing straight from the outset: it doesn’t matter if the budget is in surplus this year, or even next year. No economist worth their salt thinks it matters.
The International Monetary Fund doesn’t think it matters, reporting last November that: “In the event of a sharp deterioration in the economic outlook, and hence revenue underperformance, delaying the return to surpluses could be an option, given Australia’s modest debt-to GDP ratio.”
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Wayne Swan had been hoping desperately to break a 23-year hoodoo. A Labor government had not delivered a surplus since Paul Keating was Treasurer in 1989. But, in the shadow of Christmas, he’s had to give up the dream, break an election promise and admit he’s now likely to chalk up his fifth deficit, with the red ink totalling more than $170 billion.
It was Labor that made getting the books back into the black a test of its economic credibility. It was a “guarantee”, said Julia Gillard. It would be delivered “come hell or high water”, said Swan.
“You can’t run this country if you can’t manage its Budget,” the Prime Minister said in April last year. They are the political quotes that will now haunt the ALP and be used by the Opposition to attack the competency and truthfulness of the Prime Minister.
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Julia Gillard and Wayne Swan are clinging to their rhetoric about announcing a budget surplus in May next year like it’s a political life-raft. But like many of the boats that keep on coming, this raft is taking on water at a rapid rate.
For days now some Labor MPs have been publicly questioning the increasingly desperate insistence by the Treasurer and the Prime Minister that they will get the budget into the black for 2013/14. Last Thursday night government whip Joel Fitzgibbon said on Sky news: “I’d give it up.”
“We’ve got monetary and fiscal budget policy running in different directions ... The public will understand things are still bad in the international market place.” This on the day it was reported Treasury had advised the government to abandon its commitment.
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About a month ago a minister was renewing with vigour the Government’s determination to deliver a 2012-13 Budget surplus. “If necessary,” said the minister with sweeping arms taking in the walls of Parliament House, “we’ll get Lend Lease in to give us a quote on this place.”
It was a joke of course, but a joke which underlined the Government’s fierce resolve not to lose the political debate over which side of the ledger the Budget accounting ends up.
This raises the question of whether the political point scoring by both sides is good for the national welfare. It is appropriate to point out during the general interest in Mayan final days that it would not mean the end of the world were the Budget outcome for this current year to slip slightly into the red.
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My entire public life has been governed by a simple principle that we have a responsibility to keep our economy strong in the interests of working Australians.
Everything we do as a Labor Government is about ensuring people on low and middle incomes benefit from our strong economy.
During these times of ongoing global economic uncertainty, one of the most important things the government can do to support families is to run a strict budget of our own.
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Very, according to Julia Gillard. The PM has been at pains this morning to convince everyone the $1.5 billion buffer will not be blown out of the water at the first sign of trouble.
It’s a hard sell. This time last year Wayne Swan predicted the 2011-12 deficit would be $22.6 billion. In November’s MYEFO it was revised to $37.1 billion, and last night it was confirmed to be $44 billion.
According to Swan, the GFC wiped $150 billion off Australia’s tax take in the five years to 2012-13. A short time ago on Sky News Gillard pointed to this drop in revenue as proof of how hard she and Swan would fight to maintain the promised surplus.
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How long would the Government have lingered over this question: Do we try and probably fail to give companies $4.7 billion or do we back the sure thing of offering the cash to grateful families?
In a Budget devoted to suburban street politics more than high road economic management, the answer would be: Not much.
Given that a large chunk of that money, around $1.5 billion in 2012-13 and 2013-14, would be handed out as voters approached an election, it’s no surprise that the families won.
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If tonight’s Budget was all about the “Schoolkids”, they’d better enjoy their time in the playground while it lasts. Once they start working, there’ll be no gold watch at 65.
Faced with an ageing population, which will eventually struggle to support its top-heavy retirement class, this Budget set about encouraging even the quite elderly to stay in the workforce for as long as possible.
Up to now the greying of Australia has been presented as a looming crisis.
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Australian wage earners fear an economic winter during the northern hemisphere summer and are saving to protect themselves from what they believe could be another big global crunch.
Yesterday the financial markets were jolted by the elevation of anti-austerity parties in France and Greece in weekend elections and immediately took cover.
It was a rare moment of rational, ordinary Australians and occasionally irrational markets being in accord: You have got to defend yourself against countries not capable of looking after themselves.
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Labor’s recovery plan is simple and unexciting: delivering an unlikely Budget surplus.
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.
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That 2012-13 projected Budget surplus of just $1.5 billion is tea money in Australia’s $1.2 trillion economy. If someone in Treasury has a whip-around to feed the parking meters the Budget could end up back in deficit.
Well, not quite, but the existence of the surplus - should it actually come into reality - will be that perilous, and perhaps that transitory.
But the fact its existence is contemplated at all is remarkable in a global economy where many industrialised nations are on the brink of recession and would be delighted with even a manageable budget shortfall.
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