Monday, November 02, 2009

MYEFO - Repaint the debt truck!

Here's me in the National Times:

Treasurer Wayne Swan had held a sit-down press conference in Canberra complete with Power Points.

His shadow Joe Hockey held a stand-up "doorstop interview" at the back of NSW Parliament House. And the Opposition's Debt Truck was no-where to be seen.

Perhaps it was in for a paint job.

When last taken out for a spin it had "Labor's Debt bombshell - $315 billion" written on the side.

Always a piece of sophistry - the $315 billion was the meaningless gross figure rather than the more useful net figure - it's now not even in the ballpark.

Mid-Year Budget update has net government debt peaking at $153 billion rather than the $203 billion expected at budget time.

Divide that by each man woman and child in the country and you get... well not the kind of burden you would have, because annual GDP is also set to be some $50 billion higher than it was going to be.


Much of the expected debt simply won't be run up, and it will be easier to repay.

That's what happens when swift action to stop the economy stalling has what the Treasurer calls a "greater than expected impact".

Continued at National Times

The economy will grow this financial year rather than sliding as expected at budget time. Unemployment will peak at a not-too-bad 6.75 per cent mid next year instead of the expected 8.5 per cent. Future budget deficits are set to be up to half what was expected.

Too good to be true? Well it is true the Treasurer didn't expect it. His measures have worked better than he thought they would (and so did China's, just as importantly).

But it isn't true that he and the Treasury were deliberately pessimistic in May in order bring us better news now. Just about everyone was pessimistic in May, scared even. Most commentators believed the Treasury was underplaying how bad things were going to get, as Wayne Swan enthusiastically pointed out today, metaphorically waving at a pile of Budget newspaper clippings.

We're on our way out of the woods, but it'll be bumpy. Every one of the stimulus measures had an end date, and as they end we will feel the bumps.

The bumps will be made harder by the Treasurer's pledge to bank future unexpected increases in revenue. Taken literally the pledge means that next year's government election promises will be fully funded.

It'll repeat that. Taken literally the pledge means an austere election campaign, and an austere five or so years. As we should be in the aftermath of the cash splash.

The Coalition is promising austerity too. At the back of the NSW parliament Joe Hockey pointed to $4 billion of cost overruns identified in the Mid-year update, and implied they wouldn't happen if he was Treasurer.

Lets hope not.

Hockey himself had trouble managing taxpayers' money as Human Services Minister in the last government, spending millions promoting the so-called Access Card and actually calling for tenders before the Senate approved legislation it subsequently let lapse.

But if he and Wayne Swan are in favour of austerity now, that's good. We'll need it as the recovery takes hold.

Related Posts

. Ken Henry's devastating question to Senators

. The Coalition Debt Truck: Running on empty

. The Access Card is a complete mess, buried but still belching up toxic smoke

. Joe Hockey - where angels fear to tread