Elections used to be about costings. Here’s what changed

The last week of campaigns used to be frantic, behind the scenes. In public, right up until the final week, the leaders would make all sorts of promises, many of them expensive, with nary a mention of the spending cuts or tax increases that would be needed to pay for them.

Then, in a ritual as Australian as the stump jump plough, days before the vote the leaders’ treasury spokesman would quietly release pages and pages of costings detailing “savings”, which (astoundingly) almost exactly covered what they were spending, meaning they could declare their promises “fully funded”.

It was a trap for oppositions. Whereas governments seeking reelection could have their savings costed by the enormously-well-resourced departments of treasury and finance before campaigns began, oppositions were forced to rely on little-known accounting firms with little background in government budgeting.

The errors, usually not discovered until after people voted, were humiliating.

Costings time was danger time

In 2010, a treasury analysis of the opposition costings prepared by the Coalition’s treasury spokesman Joe Hockey and finance spokesman Andrew Robb found errors including double counting, booking the gains from a privatisation without booking the dividends that would be lost, and purporting to save money by changing a budget convention.

The Gillard government evened the playing field in 2011 by setting up an independent Parliamentary Budget Office to provide oppositions with the same sort of high-quality advice governments got, helping ensure they didn’t make mistakes, and enabling them to publish the advice in the event of disputes.

Ahead of the 2019 election the PBO processed 3,000 requests, most them confidential.

This means you should take with a grain of salt Treasurer Josh Frydneberg’s assertion that Labor has “not put forward one policy for independent costing by treasury or finance” – these days opposition costings are done by the PBO.

But the PBO didn’t end the costings ritual. In fact, it institutionalised it.

The ritual derives from the days when, on taking office, new governments proclaimed themselves alarmed, even shocked, at the size of the deficits they inherited. From Fraser to Hawke to Howard, they used the state of the books they had just seen to justify ditching promises they had just made.

The Charter of Budget Honesty improved things

Howard applied a sort-of science to it, memorably dividing promises into “core” and, by implication, “non-core” in deciding which to ditch.

Then that game stopped. Since 1998, Howard’s Charter of Budget Honesty has required the treasury and department of finance to publicly reveal the state of the books before each election, making “surprise” impractical.

But the legislation that set up the Parliamentary Budget Office entrenched the costings ritual by requiring each major party to hand it a list of its publicly announced policies by 5pm on election eve, in order for the PBO to publish an enduring account of their projected impact on the budget.

Which is why the parties have remained keen to get in early and find savings.

Sometimes, savings backfire

In 2016 this led to a human and financial tragedy. Three days before the election Treasurer Scott Morrison announced what came to be called “Robodebt” as part of a savings package designed to to offset spending. It was to save $2 billion.

Five years later in the Federal Court, Justice Bernard Murphy approved the payment of $1.7 billion to 443,000 people he said had been wrongly branded “welfare cheats”, ending what he called a “shameful chapter” in Australia’s history.

The costings document the Coalition released on Tuesday is less dramatic.

It says it will offset $2.3 billion in new spending over four years with a $2.7 billion boost in the efficiency dividend it imposes on departments to restrain spending.

Labor abandons the game

Labor will release its costings on Thursday, and here’s what’s changed. It says it won’t offset its spending.

Shadow Treasurer Jim Chalmers wants to be judged not on the size of spending, but on what the spending is for.

The most important thing here is not whether deficits are a couple of billion dollars each year better or worse than what the government is proposing. What matters most is the quality of the investments.

He points to the hundreds of millions borrowed to support the economy during the pandemic, the $20 billion he says was spent on companies that didn’t need it, and the $5.5 billion spent on French submarines that now won’t be built.

In sporting parlance, Chalmers has walked away from the field.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Labor's costings broadly check out. The days of black holes are behind us, thankfully

Is there a “big black hole” in Labor’s election costings? It’s unlikely.

The final campaign before the arrival of the Parliamentary Budget Office in 2012, the 2010 Gillard versus Abbott contest, was full them.

Abbott was in opposition, Joe Hockey was his treasury spokesman. A treasury analysis of the costings document he produced, delivered to the newly-elected independent members of parliament to help them decide who would form government found errors including double counting, purporting to spend money from funds that sweren’t there, using the wrong time period to calculate savings, and booking debt interest saved from a privatisation without booking the dividends that would be lost.

All up, the mistakes were said to amount to A$11 billion.

Opposition costings used to be awful

In order to give his calculations a veneer of respectability Hockey engaged two accountants from the Perth office of a firm then known as WHK Horwath and wrongly said they had audited them.

“If the fifth-biggest accounting firm in Australia signs off on our numbers it is a brave person to start saying there are accounting tricks,” he told the ABC. “I tell you it is audited. This is an audited statement.”

It wasn’t. The letter of engagement later seen by Fairfax Media explicitly said the work was “not of an audit nature”. Its purpose was to “review the arithmetic accuracy” of Hockey’s work.

The Institute of Chartered Accountants later fined the two accountants who it found had breached professional standards by allowing their work to be represented as an audit.

Three years on, with the Parliamentary Budget Office in place, Hockey’s costings were comparatively controversy-free, as were Chris Bowen’s when Labor was in opposition in 2016.

Now, they’re fairly controversy-free

Costings have become straightforward. The Parliamentary Budget Office prepares the best possible estimate of the cost of each policy, then a panel of eminent Australians goes over its calculations and adds the costs together.

Labor’s panel this time was the same as its panel last time: Professor Bob Officer, who chaired the commissions of audit for the Howard and Kennett Coalition governments, Dr Michael Keating, who used to head the department of prime minister and cabinet and finance under the Hawke and Keating governments, and company director James MacKenzie.

They found the Parliamentary Budget Office costings to be “of a similar quality as budget estimates generally”.

They provided “a reasonable basis for assessing the net financial impact on the Commonwealth budget”.

Labor’s costings are propped up by savings

That impact was a return to “strong surplus” of $22 billion under Labor in 2022-23, four years ahead of the Coalition, in a year which the Coalition is forecasting a surplus of less than half the size – $9.2 billion.

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Extract from Labor’s costings document. Australian Labor Party

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Labor is able to do it because it will raise (or avoid spending) more than the Coalition. Over ten years it will save

• $58 billion by winding back payouts of dividend imputation cheques to people who don’t pay tax

• $32.5 billion by winding back negative gearing and capital gains tax concessions

• $29.8 billion by reducing superannuation tax concessions

• $26.9 billion by more fully taxing trusts

• $6.9 billion by cracking down on multinational tax avoidance and the use of high fees for tax advice as tax deductions, and

• $6.3 billion from reintroducing for four years the Coalition’s temporary budget repair levy of 2% on the part of high earners’ income that exceed $180,000

Treasurer Josh Frydenberg attacked the costing saying Labor had confirmed “$387 billion in higher taxes; higher taxes on retirees, higher taxes on superannuants, higher taxes on family businesses, on homeowners and renters and low-income earners,” which it had, although it had hardly been a secret.

The tax measures are how Labor builds its bigger surpluses.

The best an opposition can produce

Frydenberg said Labor had failed explain the “economic impact these higher taxes will have across the economy”, a charge Labor had responded to earlier by saying that wasn’t a service the Parliamentary Budget Office provided.

It was work the treasury was able to do, but the resources of the treasury weren’t available to the opposition.

Besides which, a fair chunk of those savings would be spent, on programs such as Labor’s Medicare cancer plan, its pensioner dental plan, extra hospital funding and greater childcare subsidies. They would boost the economy.

Unlike the Coalition, Labor isn’t locking in tax changes years out into the future (although its costings set aside $200 billion for extra tax cuts at some point over the next ten years); it is giving itself flexibility in order to manage the economy as needed when the time came.

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Read more: Why Labor's childcare policy is the biggest economic news of the election campaign

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Frydenberg identified as the “big black hole in Labor’s costings”, what he said was its “failure to account for the increase in spending that they have promised with changes to Newstart, to aid, to research and development”.

Four years out is conventional

It wasn’t much of black hole. Labor has not promised changes to the Newstart unemployment benefit – it has instead promised to review it. Without the result of the review or without an indication of how much Newstart might be lifted or when it would be lifted, it’d be a hard thing to cost.

Frydenberg’s other beef was with programs Labor’s document costed in detail for four years but not in detail for ten. But that is how his own budget presented its figures. It’s how every previous budget has presented its costings.

Since the late 1980s it’s been the convention to cost programs in detail only four years ahead. Before that, the budget convention was to cost programs in detail only one year ahead.

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Read more: Mine are bigger than yours. Labor's surpluses are the Coalition's worst nightmare

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It is possible that Labor’s costings document is less than perfect. It is possible that the three eminent Australians who lent their names to it have been hoodwinked. But the contours of the document are clear. Labor will tax more and spend more than the Coalition, and deliver bigger surpluses.

But it only plans to tax more up to a certain point: 24.3% of gross domestic product, which was the tax take in the final year of the Howard government. The Coalition’s limit is 23.9% of GDP, which will mean it finds it harder than Labor to build up a big surplus quickly.

The days of black holes are behind us, thankfully.

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Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Mine are bigger than yours. Labor's surpluses are the Coalition's worst nightmare

On Friday morning the Coalition’s worst dream will come true.

All throughout the campaign, and all through the two terms in office and three prime ministers and three treasurers who preceded it, they’ve argued they are better than Labor at managing money. They had budget surpluses under Howard that Labor didn’t have under Rudd and Gillard.

In the last election, Labor allowed them to get away with it. Its costings document actually forecast a better budget position than the Coalition’s over ten years (because it rejected the Coalition’s expensive company tax cuts) but a worse position over the immediate four-year “forward estimates”, because of its more generous programs.

The Coalition focused on the four years, not the ten, and painted Labor as irresponsible.

Bigger, sooner surpluses

On Friday morning, Labor won’t make the mistake again. Yes, it’ll detail (and have year-by-year costs for) programs that are more generous than the Coalition’s, among them cheaper childcare, its Medicare cancer plan and its pensioner dental plan.

But it’ll be able to more than pay for them in every one of the next ten years because of a number of courageous decisions that’ll save money, the most financially important of which is the decision to stop sending company tax refund cheques to people who don’t pay tax. It’ll save A$5 billion in the first year and more in future years because the cost of the refunds has been ballooning.

The result will be a larger budget surplus in every one of the next ten years, including each year of the forward estimates and including the financial year about to start, which is when the budget is scheduled to return to surplus.

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Read more: Words that matter. What’s a franking credit? What’s dividend imputation? And what's 'retiree tax'?

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So big will be these bigger surpluses that Labor has its budget on track to hit the Coalition’s target of 1% of gross domestic product four years earlier than the Coalition in 2022-23 rather than 2026-27.

That means that in Labor’s first budget, which it will deliver in August this year if elected as a means of resetting forecasts, its projections will show the long-awaited surplus of 1% of GDP within the forward estimates, rather than beyond them as in the Coalition’s budget.

Labor’s 1% of GDP will be A$22 billion, twice the surplus of $9.2 billion the Coalition plans to deliver in that year.

All Labor needed was courage, and the ability to withstand complaints from people who own shares but don’t pay tax and are naturally upset about losing government cheques they’ve become used to.

And lower government debt

Bigger surpluses and the much more rapid delivery of a substantial surplus will mean much quicker reductions in government debt. The budget had the government on track to eliminate net debt by 2030. Labor’s costings will have it on track to eliminate it much sooner.

Despite what the Coalition would like to claim, the key reason Labor’s surpluses will be bigger isn’t that Labor won’t be matching its longer-term tax cuts. Bracket creep means tax rates need to be cut or thresholds adjusted from time to time to ensure the personal tax take doesn’t climb too high. Labor’s costings recognise this, including a built-in assumption of tax cuts after the tax take hits 24.3% of GDP, a figure cunningly selected because it was the tax take when Howard left office.

If delivered as income tax cuts, at about the time the Coaltion’s high-end tax cuts are due, it’ll cost A$200 billion, but the method of delivery will depend on circumstances at the time.

With future tax cuts baked in

Labor’s “technical assumption” that the tax take won’t climb beyond 24.3% of GDP is different to the Coaltion’s “guarantee” that it won’t climb beyond 23.9% of GDP. It is a technical assumption rather than a promise, of the kind usually included in budget documents as a way of allowing for inevitable future tax cuts.

Without it, Labor’s surplus projections would have been much bigger and would have been hard to believe. With it, the projections should be credible.

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Read more: Election tip: 23.9% is a meaningless figure, ignore the tax-to-GDP ratio

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The secret sauce in Labor’s better budget projections isn’t that it isn’t adopting the Coalition’s tax cuts. It is that it’s tackling the handing out of billions of dollars in dividend imputation cheques to people who don’t pay tax in a way the Coalition wasn’t prepared to.

Not that it didn’t think about it. A file list seen by Fairfax Media shows Treasury created a file entitled “Tax Policy - Dividend Imputation” in the lead-up to then Treasurer Scott Morrison’s 2017 budget.

The tax reform discussion paper commissioned by his predecessor, Joe Hockey, found “revenue concerns with the refundability of imputation credits”.

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Read more: Vital Signs: When it came to the surplus, both Bill and Scott were having a lend

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Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Election tip: 23.9% is a meaningless figure, ignore the tax-to-GDP ratio

Expect to hear a lot about tax during the coming leaders’ debates.

Which is why it’s important to get two things straight.

The first is that you can’t argue against a tax by pointing out that it will take money from people.

By all means, use that as an argument against taxes in general. It’s true – taxes take money from people. But to oppose better taxing capital gains or tightening up on dividend imputation refunds because they will take money from people is to leave unexplored the more important question of whether those particular tax measures are better or worse than the alternatives.

You can’t escape that question by just saying that all taxes are bad – that we ought to collect less. For any amount of tax collected, the next most important question is the way in which it is collected.

Low tax and high spending can be the same thing

And the second thing we ought to get straight is that talk about one side of politics being “low tax” and the other being “high tax” tells us next to nothing.

To see this, consider Bill Shorten’s childcare policy announced on Sunday. Labor has promised to spend A$1 billion a year in subsidies to cut the cost of childcare for every family with a combined income of up to $175,000 and to make it free for working families earning up to $69,000.

But what if, instead of subsidies, it had promised to deliver the $1 billion via tax rebates, to be paid to parents on proof of their use of childcare?

The effect would be same, although the method of payment would be more complicated.

Childcare would be just as supported, and just as supported from the public purse, but one policy would be called “big spending”, while the other would be called “low tax”.

Take the quiz

Here’s a quiz: is the Private Health Insurance Rebate a tax break (and counted in the budget as a contribution toward lower taxes and smaller government) or is it a spending measure (and counted in the budget as boosting the size of government)?

What about the Family Tax Benefit? Or the film industry tax rebate or the seniors And Pensioners Tax Offset or the Low Income Tax Offset or the existing Child Care Rebate?

It’s okay. You’re not expected to know. The answer varies from case to case. The point is that it is silly to claim that tax cuts are good, and government spending is bad, when in many cases each could be easily classified as the other.

The signature measure in the April budget is a case in point. It’s a tax offset of up to $1,080 per person to be paid out with tax returns after July 1. It’ll push billions into the economy, just as the Rudd government’s cash bonuses during the global financial crisis did. But Rudd’s payments were categorised as spending; these payments will be categorised as tax cuts, which means they will keep down the tax-to-GDP ratio.

Which means it is silly to talk about the tax-to-GDP ratio, as the government insists on doing.

That speed limit, where did it come from?

Labor was keen enough to do it while it was in office, boasting in its final budget in 2013 that its tax-to-GDP ratio was lower than in the Howard years, and lower than it had been before the global financial crisis, as if that was an achievement to be proud of. It wasn’t. The ratio was lower than during the mining booms because fewer tax dollars were rolling in, and it was lower than before the financial crisis because the economy was weaker.

The Coalition has hardened the tax-to-GDP ratio into a target. As treasurer, Scott Morrison spoke last year of “a speed limit on taxes in our budgets, that requires that taxes do not grow beyond 23.9% of our economy”.

Why 23.9%? Well, in the Coalition’s first budgets it wasn’t a target at all, merely an operating assumption used by the treasury for long-term forecasting. As it explained in the 2017 budget papers:

A tax-to-GDP “cap” assumption is adopted for technical purposes and does not represent a government policy or target. It is based on the average tax-to-GDP ratio over the period from the introduction of the GST and to just prior to the global financial crisis.

Treasurer Josh Frydenberg and Finance Minister Mathias Cormann have begun talking about 23.9% as if it’s a commitment, a pledge, even though it would be hard to keep if the economy picked up (and probably unwise to keep), and even though it is fairly meaningless given the ease with which changes in spending can be classified as changes in tax and the other way around.

Treasury makes pretty clear what it thinks about the measure in the back of Budget Paper 1. That’s where it sets out the history of the important budget measures and its forecasts for the future. You won’t find the tax-to-GDP ratio in the first two tables. Instead, it details “revenue to GDP”, which is a much more relevant measure because it includes income from all sources – fees as well as taxes, and income from Future Fund earnings which are revenue too.

Think like treasury

Early in his time as time as shadow treasurer, Labor’s Chris Bowen bought into tax-to-GDP debate, challenging the Coalition to keep the ratio below such and such per cent. He isn’t doing so now.

It’d be wise to ignore talk of the tax-to-GDP ratio in the coming leaders’ debates

Focus instead on what they’re planning to do and how they are planning to pay for it. You’ll get a handle on how to vote.

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Read more: It’s the budget cash splash that reaches back in time

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Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license.

Read the original article.

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Pensioners and unemployed pay for election giveaways

Elections are where we get given things, right?

That's true, for the voters who matter. The rest are treated appallingly. A spreadsheet of Coalition promises maintained by Fairfax Media includes picnic tables, boardwalks, fire trails, skate parks, car parks, netball courts, tennis courts, disabled toilets and lighting for sports ovals.

None are even remotely the responsibility of the Commonwealth, and at any other time the Turnbull government and his ministers would rightly handball responsibility for them to the states, along with schools. But they are in electorates they need to hold. I am told they have set an unofficial limit of $20 million per electorate they believe is in play. It's bribery done cheaply.

Out of sight, they're funding those promises by taking money from people whose votes matter less.

The Newstart unemployment benefit hasn't changed since its inception. Indexed in line with prices rather than wages, it's just $264 a week ($13,700 a year), which is way below the pension at $397 per week. Except for once. On March 20, 2013, under the Gillard government, Newstart recipients got a bonus, an extra $4.20 per week added permanently to their benefit in the form of a clean energy supplement. It was made up of what the carbon tax would do to the cost of living (0.7 per cent) plus an extra 1 per cent.

It stayed when the carbon tax went, leaving Newstart recipients for the first time slightly better off. Wage earners got their own compensation in the form of income tax cuts, which they also kept, something Treasurer Scott Morrison was keen to remind us in the aftermath of this year's budget, telling the press club: "When you get rid of a carbon tax and then you keep the tax relief, that turns from being compensation to a tax cut".

Yet quietly, in the same budget, he removed the clean energy supplement. From September while wage earners keep their tax cut, and existing Newstart recipients keep their Clean Energy Supplement, new recipients will lose it. Morrison is taking away the only proper pay rise they had ever had.

But it's worse than that. Because of the way the clean energy supplement was introduced, removing it will actually leave them worse off. When it came in, their base payment was boosted by 0.7 per cent less than it should have been, because 0.7 per cent of the increase was due to the carbon tax. Then they were given the supplement of 1.7 per cent. Removing the supplement will leave incoming Newstart recipients worse off than if the whole thing had never happened. A calculation by a former department of social security analyst provided to the Australian National University suggests they will be $3.60 per week worse off. Morrison has not only taken away a benefit, he's also given Australia's most desperate citizens a pay cut.

The budget says removing the supplement will save $1.4 billion over five years, which is a fair chunk of the $2.3 billion Morrison and Prime Minister Malcolm Turnbull plan to spend on picnic tables, boardwalks and the like. Australia's least well-off are funding giveaways in marginal, predominantly Coalition, electorates. As are pensioners. The income test for the pension works though something called the deeming rate. Instead of finding out what pensioners' bank deposits and investments actually earn, the government "deems" the rate of interest they earn and then uses the deemed income to restrict access to the pension. The lower the deeming rate, the more access part-pensioners get.

Last March after the Reserve Bank cut its cash rate, the government cut the deeming rate for small investments from 2 to 1.75 per cent and for big investments from 3.5 to 3.25 per cent. "More than 770,000 Australian part-pensioners and allowance recipients will be given a $200 million boost to their payments," the then social services minister crowed. "The current generation of aged pensioners had a deal with the government over their lifetime that if they worked hard there would be an aged pension at the other end. This government is keeping that deal and seeking to make the aged pension sustainable for future generations who will need it." The Social Services Minister was Morrison.

The Reserve Bank has cut its cash rate two more times since then and the private banks have followed. But neither Morrison as Treasurer nor his successor as Social Services Minister have cut the deeming rate. The Commonwealth Bank's pensioner security account is now offering just 0.25 on the first $2000 and 1.25 per cent beyond that. After $48,600 it's offering 2.5 per cent where the deeming rate is 3.25 per cent. Pensioners who bank with the Commonwealth or any of the other major banks are losing income because the government is delaying adjusting the deeming rate in accordance with reality.

They've something in common with the unemployed: they are not particularly visible and they are not good at complaining, which makes them good victims. Along with welfare recipients who'll face greater checks to see they haven't been overpaid, they're helping to bring the deficit down so the rest of us don't have to.

In The Age and Sydney Morning Herald

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Forget about black holes, they're not there

This time last election the Rudd Labor government blew itself up with a document purporting to find a $70 billion black hole in the Coalition's costings.

There wasn't. The error-ridden claim was rated "false" in the first Fairfax-Politifact fact check and set the tone for the rest of the campaign.

Rattled, Labor had jumped at shadows. Twenty billion of its total shouldn't have been there and much of the rest was guesswork based on figures the Coalition hadn't yet provided, or had provided but Labor chose not to believe.

To repurpose the words of Thursday's Australian Financial Review headline: Labor was left with over-egging all over its face.

There's never any point in claiming the other side has a black hole early in the campaign, and hasn't been for more than a decade.

Here's how it has worked since the start of the century: 1. Each side makes promises. 2. Each side publishes an estimate of the cost of each promise over the next four years. 3. At the end of the campaign, when all the promises are public, each side produces a tally of what it proposes to spend (which it has usually proudly trumpeted) and what it proposes to save (about which it has usually been more quiet ).

And guess what? The proposed savings always slightly exceed the proposed spending, leaving the budget slightly better off over four years.

That's not to say that things will turn out that way. Last time the Coalition's costings pointed to a slight $1.5 billion-a-year improvement in the budget deficit. Instead, the projected deficit blew out from $7 billion to $37 billion. That's partly because company tax revenues didn't recover in the way that was expected, and partly because the Coalition never got to implement many of its policies. One was axing Labor's low-income super contribution. It was held up in the Senate for two years and then withdrawn in this year's budget because it was heartless.

But the tally of costings released at the end of the campaign almost always does add up and always puts the budget slightly ahead. There's never a black hole.

Which makes Tuesday's attempt by the Coalition's to find a hole in Labor's program a triumph of hope over experience. Where was Joe Hockey when they needed him? Neither the Coalition's Finance spokesman Mathias Cormann nor its Treasury spokesmen Scott Morrison were in their jobs back in 2013 when Labor self-immolated over its claim of a $70 billion black hole. So they cooked up their own, worth $67 billion.

Much of it was fiction. A whopping $19.27 billion, a quarter of the total, was a misreading of Labor's foreign aid commitment. Labor has promised to boost spending by less than $1 billion over the next four years. Cormann and Morrison penciled in $19.27 billion on the basis of an ill-defined commitment to restore cuts Tanya Plibersek made a year ago in a Newcastle radio interview. On Sunday she released the actual policy, but Cormann and Morrison didn't bother to update their spreadsheet.

They claimed Labor would spend $6.73 billion lifting compulsory super contributions to 12 per cent of salary even though the specifics of the promise weren't announced; specifics such as how quickly Labor would phase in the increase and whether it believed it could afford to do it in the next four years at all. The "commitment" came from an interview Bill Shorten did on RN Drive in which he talked about what he would like to do "over time, over the long run".

The mistakes, and there were many more, say much about the helplessness of government staffers when they are without the support of the bureaucracy. They would be well advised to install a pop-up on their screens reading: "What would treasury do".

But even were there no mistakes, the exercise of looking for a black hole would be pointless. It isn't until the end of the campaign when all the policies and the means to fund them are on the table that a spendometer make sense. And by then it's too late. Last time the Coalition released its tally on the Thursday, 1½ days before the vote.

I can already tell you what Labor's tally will say. Like the Coalition's last time it will show a slight improvement in the budget's position. And like the Coalition's it'll get a tick from the Parliamentary Budget Office when it issues the required report 30 days after the vote. Politicians are good at costing their own promises, bad at costing those of the other side.

If the black hole hunters were serious about bringing us the truth, they would change the law to require the PBO to publish a running total of promises, and also require it to make public the methods by which it arrives at the costings politicians quote.

In the meantime it would be nice if they shut up at the debate between Treasurer and shadow treasurer on Friday. The purpose of what they are proposing is much more important than whether the other side thinks the numbers add up.

In The Age and Sydney Morning Herald

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Negative gearing report linked to Morrison ally

Research intended for use in a bid to discredit Labor's negative gearing campaign was commissioned after a meeting between Scott Morrison and a close friend and senior figure in Australia's property industry.

But the draft report contains a series of factual errors and makes bold claims of a "resale price cliff" and "social dysfunction" that have alarmed some in the real estate industry to whom it has been circulated. it has been circulated to in the real estate industry.

An email obtained by Fairfax Media shows Greg Paramor, the managing director of property company Folkestone, discussed the need for a study critiqueing Labor's policy with Brian Haratsis, the executive chairman of advisory firm MacroPlan Dimasi. Mr Paramor, who is a friend of Mr Morrison and former president of the Australian Property Council, made the request after his encounter with the Treasurer.

"Greg recently had the opportunity to meet with The Hon. Scott Morrison to discuss negative gearing," the email notes. "As a result of that meeting, Greg agreed to provide a report to the Treasurer – he asked Brian Haratsis to undertake a study on the impact of the proposed negative gearing changes."

The email, sent from an unnamed person inside Mr Paramor's company, was sent to senior industry figures last week.

It also asks for feedback as "the Treasurer is keen to get the report next week".

Entitled "Short Memory: Negative Gearing and Capital Gains Tax: Foundations of the New Australian Housing Model," the attached draft report is also presented with an alternative title: "Shortened Memory".

It claims Labor's policy would remove 205,000 dwellings from the rental housing stock over a decade, adding to housing stress. Asked why removing dwellings from the rental stock would add to housing stress when the dwellings would still be available for use, Mr Haratsis said the phrase was meant to refer to low-income rental dwellings.

The draft says Labor's policy would both make housing less affordable and create a "resale price cliff" as large numbers of apartments were sold at a loss. Mr Haratsis explained the apparent contradiction by saying the market was bifurcated and that different parts of it would react differently.

Mr Paramor confirmed to Fairfax Media he had recently met with Mr Morrison over the negative gearing issue but denied he had been asked for the research by the Treasurer.

"It [negative gearing] was one of the things we discussed," he said, but he "didn't know" why the leaked email from a member of his staff said the Treasurer was keen to get the draft report this week.

Mr Morrison's office said the Treasurer met with "many people from the community and the real estate industry who are raising concerns about Labor's negative gearing proposal".

The Treasurer's office denied he had asked for a report to be prepared or that he or his office had received copies.

The report also says Australian governments would need to stump up an extra $3.3 billion per year for social housing and rent assistance should Labor's policy became law, more than the $3.2 billion per year it would raise.

The total economic cost of Labor's policy would be $5 billion per year, a reference Mr Haratsis said has since been removed from the document after acknowledging that it was arrived at by adding up payments without subtracting receipts.

"I am writing this as we go, and there are a number of references that you are looking at that won't be there in the final," he said. "I want to go back and recalculate the numbers."

The draft also details unquantified costs including "increased levels of social dysfunction on the urban fringe" and an "increased carbon footprint for low income renters as affordable private rental stock in established areas shifts to the urban fringe".

Prepared in haste with what appears to have been a speech recognition program, the draft at one point refers to Labor's promise to "grandfather" the entitlements of existing investors as a promise to create "ground furthered" properties.

It says the change would result in "market chaos" because Labor had not defined what would be regarded as a new property and exempt from the charges and what would be regarded as an existing property.

"For example, is a refurbished building for residential purposes a new building?" it asked. Mr Haratsis conceded that the definition might be clearer in the legislation.

The leaking of the report potentially blunts another avenue of attack on Labor's plan to restrict negative gearing to new properties only and halve the capital gains tax discount to 25 per cent, which has been the subject of a fierce government scare campaign.

Mr Haratsis insisted it was his decision to initiate the report after his meeting with Mr Paramor, that he would fund the work himself and that it was planned for release next week - at which point "I could maybe give it to the Treasurer".

The report critiques organisations such as the Grattan Institute, which engages in "Robin Hood economics" and chooses to "ostracise high income individuals" instead of focusing on tax efficiency.

In The Age and Sydney Morning Herald

Read more >>

Don't trust the budget numbers. Treasury says so

About the only thing the Treasury believes about this year's budget is the economic forecasts. It certainly doesn't believe the deficit forecasts.

Temporarily unmuzzled by its political masters, the Treasury has revealed that the forecasts are propped up by $18 billion of budget measures still on the books but not yet through the Senate. Many date back to 2014. They are propping up their third budget.

They are propped up too by "the established practice of assuming that, once the economy returns to potential, it remains growing at that rate".

The practice assumes away problems. "Should Australia experience a significant negative economic shock, the fiscal position would be expected to deteriorate rapidly and not be consistent with the projections," the Treasury warns.

The most bizarre and unlikely assumption is that Australia's tax receipts will never climb above 23.9 per cent of GDP. It's a government-imposed figure which is the average between the introduction of the GST and the global financial crisis. There's no particular reason for it, and it makes budgeting nonsensical. When Australia's tax receipts eventually climb back up to that level it will be impossible to improve the budget by tightening up on tax concessions. As soon as that's done, other taxes would need to be cut in order to stay below the ceiling. The budget could be improved by eating into pensions, but not by eating into super concessions.

The Treasury is also worried about Australia losing its triple-A credit rating, far more so than it was able to admit in the budget papers that were signed of by the Treasurer. "It is crucial for Australia to maintain its top credit rating to ensure the Commonwealth's borrowing costs, and those across the economy more generally, are kept as low as possible," it says.

If the government's rating was downgraded, the ratings of the banks would also fall. Private estimates say it would add about $200 million to banks' interest bills.

The Treasury left its economic forecasts the same in order to avoid implying false precision, and perhaps also to avoid distracting from its central message, that the projections in the budget it helped produced just three weeks ago are less than believable. 

In The Age and Sydney Morning Herald

Lift tax or cut spending - budget update

Treasury and finance have warned both sides of politics that big spending cuts, or higher taxes, will be essential if the budget is to be returned to surplus.

And in a blunt message to their political masters, departmental secretaries John Fraser and Jane Halton say it is "crucial for Australia to maintain its top credit rating".

The warnings are contained in the Pre-Election Economic and Fiscal Outlook, which is prepared by the two top financial authorities without input from ministers and released shortly after the start of the campaign.

Coming so soon after Scott Morrison's May 3 budget, the major forecasts for gross domestic product, unemployment, wage growth and the consumer price index are unchanged, despite a recent interest rate cut, a fall in the iron price and weak wages and labour force data.

"Without considerable effort to reduce spending growth, it will not be possible to run underlying cash surpluses, say in the order of 1 per cent of GDP, without tax receipts rising," it says.

The government has imposed a ceiling on tax revenue of 23.9 per cent of GDP.

The heads of treasury and finance say that even if the government manages to spending back down to its long-term average, tax receipts would still need to climb to around 24.2 per cent of GDP by 2026-27, well above the average of the past 30 years, and well above the government's target in order to achieve a surplus of 1 per cent of GDP."

It says the budget forecasts are propped up by $18 billion of unlegislated so-called zombie measures from this year's and earlier budgets that have yet to pass through the Senate. If they remain stalled, the five-year budget outcome will be $18 billion worse than the budget papers suggest.

The document quotes tax commissioner Chris Jordan as saying that one of the budget measures, the tax cut for Australians earning over $80,000, is unimplementable without leglislation. The government says the tax cut is means it will start on July 1 as promised however income will be deducted from pay packets under the existing schedule. If later the measure is approved by the Parliament the schedule could be amended, or extra could be returned to high income earners in their tax returns.

Finance Minister Mathias Cormann said that wasn't a problem given that people would not be putting in their income tax returns for the 2016-17 financial year until next year. It was how previous Labor governments had handled similar tax cuts.

Shadow treasurer Chris Bowen said Labor backed the tax cuts but that the government had "clearly not done its homework".

"The dysfunction of having a budget brought down and then three weeks later, less than three weeks later, the secretaries of the departments reporting that a key measure might not be delivered says it all. This is a budget which veered from thought bubble to thought bubble."

Mr Cormann called on Labor to explain how it would fund its promises. The release of the document left it "no more excuses"

The department echos a warning from ratings agency Moody's last month that Australia's AAA rating was be at risk.

"Commonwealth government debt levels are projected to reach recent historical highs, both on a gross and net basis," it says. "These debt levels are not an immediate concern given historically low interest rates and a growing economy, but should Australia experience a significant negative economic shock or increased interest rates or debt levels rise above current projections over the medium term, the debt burden will impose an increasingly significant cost on the fiscal and economic outlook."

"It is crucial for Australia to maintain its top credit rating to ensure the Commonwealth's borrowing costs, and those across the economy more generally, are kept as low as possible."

Mr Morrison and Mr Bowen will face off in a debate next Friday.

In The Age and Sydney Morning Herald

Read more >>

Parliamentary Budget Office: the next election fix

Fixing the Senate voting system is good, but it isn't enough. Unless Malcolm Turnbull goes further and also fixes the rules governing the Parliamentary Budget Office, the election will be a charade.

Here's what happened last time.

The Coalition (then in opposition) released policy after policy, which it said had been fully costed by the PBO. But it didn't release the actual costings.

In effect, it verballed the PBO. The Office assigns each of its costings a reliability rating on a scale ranging from "low" to "highly reliable". Where the costing is unreliable, it says why. And it sets out the assumptions it used to derive it.

While keen to lend the authority of the PBO to its claimed costings, the Coalition, for the most part, sat on the documents that would have allowed us to understand what they meant.

At times, it went to absurd lengths. It had claimed that cutting the public service by 12,000 would save $5.2 billion. When the government and others started questioning the costing, it showed the PBO costing document to select journalists so they could see it was genuine, before whisking it away so it couldn't be photographed...

It was happy for the public to pay for the PBO ($7 million per year) so long as the public couldn't read what it had written.

Now Labor is doing it. It's now in opposition and it is misusing the PBO in the same way that the Coalition did. It has released policies on negative gearing, capital gains tax, superannuation, tobacco tax and school funding, all quoting what it said were the PBO's conclusions but without releasing the documentation needed to assess them.

The Greens have no such reluctance. They often release PBO costings with policies. They've no reason not to.

Labor says its negative gearing policy would raise $32.1 billion over a decade. But without knowing whether the PBO regarded the figure as reliable and without knowing how it got it, its claim is difficult to assess.

It can and should be fixed by requiring the PBO to release each costing (just the final document, no drafts) as soon as the party that commissions it made the costing figure public.

It'd hurt the opposition (whoever is in opposition) but it would make the election make sense. We would be better able to decide who to vote for, as well as better able to fill in the form.

In The Age and Sydney Morning Herald

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History repeats. Coalition auditor breached standards

Two years on from the Coalition's 2013 election victory, one of the three experts who "independently verified" its campaign costings has been found guilty of breaching auditing standards.

Len Scanlan, a former Queensland auditor general, has been penalised by CPA Australia for failing to uphold professional standards in the work he did for the Coalition.

But in an unusual move reported on the CPA website on May 25 the disciplinary tribunal found there were "exceptional circumstances" involving his work for the Coalition's Joe Hockey and ordered his name not be published.

Mr Scanlan was one of three members of the shadow treasurer's independent review panel. The other two were Geoff Carmody, a former head of Access Economics, and Peter Shergold, a former head of the prime minister's department. Mr Scanlan is the only one who belonged to a professional accounting association, and so the only one subject to sanction.

The panel produced a four-paragraph report released two days before the vote saying it believed the Coalition's costings were "based on fair and reasonable assumptions" and represented "a fair estimate" of their impact on the budget.

It enabled Mr Hockey to claim: "all of our policies are fiscally responsible and independently verified".

But in a complaint to CPA Australia, economist Betty Con Walker and emeritus accounting professor Bob Walker pointed out that the relevant standard requires accountants offering assurance to provide a description of any significant inherent limitations on their findings. One limitation was that the finding was prepared without direct access to Commonwealth records. Another was that several of the Parliamentary Budget Office costings relied on by the panel were themselves described by the office as being of "low to medium reliability"...

The panel itself did not produce a statement of the level of assurance it was prepared to provide for each item costed, as required by the auditing standard, nor did it disclaim responsibility for Coalition's achievement of the results as required by the standard.

The costing endorsed by the panel found the Coalition's program would improve rather than worsen the 2014-15 budget deficit.

Professor Walker and Dr Con Walker's complaint to CPA Australia follows another they made to the Institute of Chartered Accountants after the 2010 election which fined two Perth accountants for breaching professional standards in their work for the Coalition.

The accountants had allowed Mr Hockey to describe their work as an audit which it was not, and to say that they had certified "in law that our numbers are accurate".

A subsequent treasury review found mistakes including double counting amounting to $11 billion.

The CPA Australia disciplinary tribunal decided to impose no monetary penalty on Mr Scanlan in May and instead imposed "the penalty of an admonishment". It "exercised its discretion" to direct that his name not be disclosed.

Mr Scanlan holds the CPA National President's Award and in 2003 he was awarded a Centenary Medal for distinguished service to the public sector.

He told Fairfax Media he did not want to comment on the tribunal's finding.

Professor Walker said it was "hard to think of a more blatant ethical breach than the publication of a defective report on government finances just days before a national election". The primary responsibility of accountants was to act in the public interest.

The Coalition was forced to use an outside panel to cost its 2013 election promises because of a provision inserted in the Parliamentary Budget Office Act by Labor that prevents the office from costing policies confidentially once an election has been called.

It means that Labor will face a similar problem in this election as will any accountant who works for it.

• The report to the Coalition
• The complaint to CPA Australia
• CPA Australia's finding

In The Age and Sydney Morning Herald

Read more >>

The Parliamentary Budget Office is corrupting rather helping political debate

What happened on Q&A last week was just the tip of the iceberg. And I am not talking about tampons. I'm talking about real ambushes, the kind that are genuinely unfair.

Joe Hockey was asked to respond to modelling that said his budget would cost some families $21,000 over four years.

"Well, hang on. I haven't seen this modelling," he replied. Most of Australia hadn't. Bill Shorten's office had released results from the work it had commissioned from the National Centre for Social and Economic Modelling without releasing the work itself.

"You're asking me about something I haven't seen, the government hasn't seen and most of the media haven't seen," Hockey quite rightly pleaded. "I don't know what the assumptions were ... I have seen lots of economic modelling. What you put in and what comes out, you don't want to see. I want to see what's going into this sausage machine."

His point wasn't that there was anything wrong with the centre's modelling (as far as he knew), it was that without knowing which measures it had included, which measures it had excluded and what it had assumed about wages and so on, he was being asked to wrestle with a column of smoke.

And not only Hockey. The previous day Labor had asked journalists to report on what it said were the centre's findings, without showing them its report. They could ask questions of the centre, but weren't allowed to see what it had written.

Perfectly timed for the start of the parliamentary week, Labor's tactics gave it a weapon to use against the government while depriving the government of a weapon to use against it. That it later relented and released the report doesn't excuse its behaviour.

It's not the first time. In April, Labor announced a new policy on superannuation that it said had been "costed by the Parliamentary Budget Office" as saving $14.3 billion over 10 years. But it wouldn't release the costing. How the office arrived at it, or even if it had, was a matter of conjecture...

The Parliamentary Budget Office costs us $7 million a year. It employs 35 people. It was set up to give us confidence that the promises made by our politicians would cost what they said they would cost. But the rules governing it allow politicians to hang on to its work, even while they are quoting it, misrepresenting a cost that may have been arrived at by one means as if it had been arrived at by another.

Every costing concluded by the PBO is given a reliability rating ranging from "low" to "highly reliable". But Labor won't say what rating the costing of its super policy got or how the costing was arrived at. When asked, it says that the Coalition didn't release the costings it commissioned during the 2013 election. 

And it's right. The Coalition released 80 or so policies during the campaign, almost all of them costed by the PBO and to the best of my knowledge none of them publicly released.

At times the charade was farcical. The Coalition claimed that cutting the public service workforce by 12,000 would save $5.2 billion. It said the PBO had said so. But how was the figure arrived at? Which financial year did the savings start from? Did they include the savings on rent? Did they include superannuation savings? So heavy was the pressure on the Coalition to answer the question, and so keen was the Coalition to deny Labor the opportunity of seeing what its numbers meant, that it resorted to showing the document to selected journalists on the proviso that they could look at it for a few minutes, take only a few notes, and take no photos before it was whisked away.

Then at the death knell, on the Thursday before the poll, it released a few pages of numbers. No details, no clues as to how the numbers were arrived at.

Instead of allowing us to understand what our politicians had been promising us, our investment in the Parliamentary Budget Office allowed them to treat us like mugs.

After the election the full costings were published in accordance with a rule that requires the PBO to give a full accounting within 30 days. We did get to see them, but too late.

It can easily be fixed. And it's in the Coalition's interest to fix it so that Labor doesn't do next time what it did last time.

The rules should be changed to require the PBO to release a costing document as soon as the party that commissions it quotes it. Until then, it should be completely confidential. The PBO should also be able to continue to do confidential work for politicians right up until polling day, something it cannot do at the moment once the election is under way.

It's not only the Coalition that should listen. It's also Labor in Victoria. It is about to set up Victoria's Parliamentary Budget Office. It's too important to get wrong.

In The Age and Sydney Morning Herald

Read more >>

Truth in promises. A policy worth voting for in the Victorian election

Now noone knows where the money is coming from.

Usually governments are restrained in what they offer in election campaigns. Their promises are already in the budget, already accounted for. It's the opposition that appears reckless, making promises that by definition aren't in the budget and aren't funded with savings.

Unless the government is in imminent danger of losing. Then it'll throw out money like an opposition on steroids, announcing unfunded promise after unfunded promise like a squid under attack squirting out ink.

Denis Napthine announced new promises worth $4.2 billion in his 33-minute campaign launch speech on Sunday. Something of a record, it works out at $127 million per minute which is more per voter per minute than John Howard promised in his final desperate pitch to get re-elected in 2007.

Most of it was for trains and trams, which is odd because just two days before, the Prime Minister Tony Abbott defined the election as a "referendum on the East West Link".

When you're facing political death it's wise to cover bases. Which means scrambling to find money.

We don't yet know where he would get the $3.9 billion for public transport, the $100 million to spend on regional cities, the $23 million to give to parents of kindergarten children and so on and nor do we really know how he would find the $8.5-$11 billion he promised in the budget to pay for the Melbourne Rail Link. Most of it is beyond the budget's four-year forecasting horizon...

And we are not likely to know until just before the election. "At a later stage" are the words used by the treasurer's office. If history is any guide we'll be told on the Wednesday or Thursday before the vote; or even on the Friday, election eve. It'll be too late for the Victorians who've voted early (more than half a million are expected to) and effectively too late for debate and discussion about what Napthine has in mind.

It'll be the same for Labor, although at least it has come up with a date. It'll outline the costs of its promises and how they will be funded >on the Thursday before the poll - that's 40 hours before we vote. Labor will outline these promises in a press conference attended by a representative of Moore Stephens✓, the private accounting firm that has been going over its numbers.

It's an appalling way to treat the people who are meant to be deciding how to vote, not to mention the press which is meant to be giving those people the information they need to decide.

"The big reveal" two or three days before the election can and does result in voters being misled, with no time to check the truth of what they are being told.

In the 2010 federal election the Coalition's treasury spokesman Joe Hockey released 12 pages of costings (with no explanation of how they were derived) late on the pre-poll Wednesday. They were covered by a one-page note from a Perth-based accountancy firm that said it was "satisfied that based on the assumptions provided, costed commitments and savings have been accurately prepared in all material respects".

But the costings weren't accurate, as the Treasury discovered after they were released after the election. Among other basic mistakes the Coalition had booked as a gain the interest it would save by banking the proceeds of selling Medibank Private without booking as a loss the dividends it would no longer receive after selling Medibank Private.

Four years later in 2013 the Coalition delivered an eight-page document that was no more informative. It did it on the Thursday, 40 hours before voting began. This time a post-election review by the Parliamentary Budget Office found it was mistake-free, but voters weren't able to know that at the time, and they weren't able to see the assumptions that lay behind it until after they had voted.

Victoria doesn't have a parliamentary budget office.

The Commonwealth has one, NSW has one, and the Victorian Coalition promised one when it was in opposition. Ideally a PBO works with political leaders to fine-tune and cost their policies and then makes public the final document when the policies are announced. The Commonwealth's has a major flaw. It is not allowed to make the documents public until the leader says so. In 2013 Abbott didn't say so. That meant the Coalition was able to claim the endorsement of the PBO without letting the public see how that endorsement was arrived at.

Victoria's wasn't going to have that flaw and the Baillieu government was going to write it into law on taking office. It didn't, for three years. Then under Napthine it introduced legislation for a cut-down "temporary recurring" PBO. Rather than working all year round it would accept costing requests only for the three months before each election and then shut down. (The NSW office is also temporary recurring but it accepts requests for many more months than three). Opposition Leader Daniel Andrews said he wouldn't cop it and Napthine dropped it.

Now Labor's putting forward a proper model that would work all year round. It would cost $3.3 million per annum. It's the least we deserve.

In The Age and Sydney Morning Herald

Read more >>

Axing the mining tax would save the Coalition money (so it says)

As unlikely as it seems, axing the Minerals Resource Rent Tax tax will save the Coalition a fortune. In fact its the most lucrative of the policies it took to the election.

Treasurer Joe Hockey put a $13 billion price tag on it on Thursday as he unveiled the draft legislation that would abolish the tax. That’s a $13 billion benefit to the government from axing the tax. Axing the mining tax itself will cost the government $3.5 billion in the years to June 2017. But axing what it says are the associated measures will make it more than $17 billion.

Among those measures, whose repeal is included in the MRRT repeal bill, are the Schoolkids Bonus, the Low Income Superannuation Contribution, the Income Support Bonus, a more generous asset write off for small businesses and accelerated depreciation for business vehicles.

All were to funded by either the mining tax or by Labor’s “spreading the benefits of the boom” package. The Coalition’s position is that the boom is receding and the tax will be no more. Everything Labor tied to extra income from mining would go as well.

With one exception. Labor’s staged increase in compulsory super contributions costs the government money because it means a greater proportion of each salary will be lightly taxed...

Tweet

The Coalition will keep the staged increase but delay it for two years.

Its an exception that will help high income earners more than low income earners, made doubly hurtful because the Coalition is withdrawing the low income super contribution. It says it wants to withdraw it from July 2013, which would make the snatching of the bonus retrospective. What is more likely is that the legislation won’t get through the Senate until after it changes in July 2014 giving low earners another year.

The mining tax (and the measures the Labor said mining would fund) might last another year.

In The Age


Related Posts

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. 11 out of 10. Coalition costings pass muster, for now

Read more >>

11 out of 10. Coalition costings pass muster, for now

It's better than last time

The Coalition has received a clean bill of health on its election costings, with the Parliamentary Budget Office finding that if anything it understated the boost they will give to the budget.

The finding is in stark contrast to that of Treasury and the Finance Department three years ago which found errors and questionable assumptions in the Coalition’s policy costings amounting to $11 billion.

The Office is required to produce an independent assessment of the costs of each of the major parties promises within 30 days of a change of government.

If finds the Coalition’s policies will save the budget $7.15 billion over four years, rather than the Coalition's $6.09 billion the Coalition had claimed. The figure is an “underlying cash balance” measure of the kind most widely used to describe whether a budget is in deficit or surplus.

But looking further ahead the Office sees problems. It says the promise to more generously index military superannuation pensions will grow from around $30 million per year to peak at $460 million in 2046-47. The saving from delaying the by two years the scheduled increase in compulsory superannuation will climb from the claimed $875 million per year to a peak of $1.15 billion before sliding to just $80 million per year from 2023-24.

Other savings penciled in by the Coalition are unlikely to come in as early as it and the Office have assumed...

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It has booked savings this financial year from abolishing the Schoolkids Bonus and axing the Regional Infrastructure Fund, measures which might not pass through the Senate.

Treasurer Joe Hockey said the finding “once and for all puts to bed the lies from the Labor party over numerous years that there was a black hole in the Coalition’s costings”.

Shadow Treasurer Chris Bowen said the true state of the government’s books wouldn’t be know until Treasury released the mid-year budget update due in December.

He said the analysis confirmed that over three million low income earners would lose the Low Income Super Contribution and that the public service would be cut at the rate of one job an hour for the rest of the financial year.

In The Sydney Morning Herald


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. Costings. Who'd want to be Hockey?

. 2010. Coalition "too dim" to stop its own rules being used against it

. Lib costings debacle - "auditors" fined

Read more >>

Stand by for the truth. It'll be the PBO document dump

Policy details the Coalition kept hidden during the campaign are set to become public in a document dump scheduled for October.

The Parliamentary Budget Office sent letters of request to all three major political groups during the campaign asking for a comprehensive list election commitments by 5 pm Friday.

The Office revealed Sunday that all three complied, Labor furnishing the names of 132 commitments, the Coalition 169, and the Greens 107.

The Office is now required to make its own assessment of whether the lists are accurate, and to release its account of what it believes was promised within 30 days of Saturday’s poll. The deadline falls on Monday October 7, just after the first week of parliamentary sittings.

It will also release its estimate the total effect of each set of commitments on the budget bottom line. The assessment will be the first not mediated by the parties themselves. The Coalition employed three analysts it said were independent who limited their comments to a one-page piece of paper saying they agreed with the Coalition's totals.

Parliamentary Budget Officer Phil Bowen confirmed to Fairfax Media on Sunday he would also release the detailed figuring and assumptions the Coalition had not...

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Many have already been prepared for the Coalition by the Office but kept secret, the Coalition deciding to release only totals rather than the means by which they were arrived at.

As a result details such as the starting date of policies and the way they would be applied were kept secret from Labor during the campaign, encouraging it to make errors such as claiming the Coalition’s policy was to cut 20,000 public service positions rather than 12,000.

The document dump will for the first time allow the public and Labor to see the details of the policies the Abbott government went to the people on.

The requirement for a post-election review was inserted into the Parliamentary Budget Office Act by Treasurer Wayne Swan in order to ensure “political parties are straight with the Australian people before the election”.

“They will be caught out afterwards if they are not,” he said in March.

In The Sydney Morning Herald and The Age













Related Posts

. Costings. Why the Coalition has gotten away with it, so far

. Dodgy costings. It'll be hunt and destroy

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Read more >>

Rearranging the furniture, because there ain't no budget emergency

How the Coalition plans to dig a hole ...

Axing the carbon tax: Net cost $6 billion

Spending on new roads: Total $5.4 billion

Cut in the company tax rate: Total cost $4.9 billion

Axing the mining tax: Total cost $3.7billion

Paid parental leave scheme: Extra cost $3.3 billion

Direct action on climate change: Total cost $2 billion

Restoring FBT break for cars: Total cost $1.8 billion

Total*: $33.2 billion

*including smaller measures


and then fill it ...

Cutting the public service by 12,000 jobs: Saves $5.2 billion

Axing the Schoolkids Bonus: Saves $4.6 billion

Abandoning the foreign aid target: Saves $4.5 billion

Company tax levy to help pay for paid parental leave: Raises $4.4 billion

Axing business tax breaks funded by the mining tax: Saves $4.3 billion

Axing the low income super contribution: Saves $3.7 billion

Axing the Regional Infrastructure Fund: Saves $2.5 billion

Slowing superannuation increases: Saves $1.6 billion

Cutting the refugee intake: Saves $1.3 billion

Axing benefit supplements funded by mining tax: Saves $1.1 billion

Axing rail infrastructure projects: Saves $0.7 billion

Saving from "Stopping the boats": Estimated net $0.7 billion

Total*: $42 billion

*including smaller measures

Source: Coalition documents

(Labor has made few election commitments of any size during the campaign. Only one approaches $0.5 billion, a promise for better before and after school care. The Labor measures offset each other, having a zero effect on the pre-election budget balance.)

Rudd made the plea repeatedly in a blitzkrieg series of appearances late this week: “If you have any doubts, don’t vote for Abbott.”

As a pitch from an incumbent government seeking re-election, they don't come much more desperate.

Any doubts, any doubts at all?

It was the feeble, last-gasp denouement of a relentlessly negative campaign from Labor.

This, from a Prime Minister who promised the end of ''wall-to-wall negativity''.

''One thing I know for certain is that the old politics of the past just won't work for the future,'' he said in the first news conference of the campaign.

Staring at a likely heavy defeat on Saturday, Rudd may reflect that he should have taken his own advice.

After framing the election as a contest of new politics over old, and over who was best to manage the economy now that the ''boom is over'', Rudd has failed on both counts.

He dumped the positive politics within days, culminating in a blunt assertion that Abbott risked tipping the economy into recession. Tony Abbott has claimed the mantle as the superior custodian of the economy, despite Australia having one of the best performing economies in the world.

Abbott has steadily increased his ratings in the opinion polls throughout the five-week campaign on the issue voters rank the most important.

The final act in the economic debate of the campaign came this week, when the Coalition, finally, revealed its complete savings and costings.

Released on Thursday by Joe Hockey, sweating like Richard Nixon under the TV lights in a news conference so excruciating that Labor posted the video on its website, they proved a fitting finale to a debate dominated by deceit and lies.

For Labor, its claim of a $70 billion black hole was shown to be the wild exaggeration it had always been.

The Coalition's final budget numbers also highlighted what some may call brilliant political strategising, but that may rank as an even grander deceit.

Despite three years of decrying Labor mismanagement and a ''budget emergency'', the Coalition has adopted the same fiscal policy as Labor. It will achieve a surplus in the same year and its $6 billion worth of extra savings represent just 0.1 per cent of GDP...

Labor has been banging on about the Coalition's $70 billion black hole near hourly for 40 days. Early on, the Fairfax and Politifact fact-checking unit found the claim false. Then one of the nation's most respected economists, Saul Eslake, published a 34-page analysis concluding that the figure was $30 billion. Still Labor persisted, along the way claiming it had discovered a $10 billion miscalculation by the Coalition (which wasn't) and that the Coalition planned to cut health spending and cut the public service by 20,000 (which it doesn't).

The government acted as if mere repetition would get it over the line. As one of its staffers put it: ''We need to repeat it until we vomit.''

The Coalition could have reassured voters that it didn't plan big cuts by bringing out its final costings document some time before the final 42 hours of the campaign. But it enjoyed watching Labor jump at shadows. Its technique of letting journalists see its Parliamentary Budget Office costings (you can look and make notes before I whisk it out of your hands) meant Labor was suckered into making claims those reporting them knew to be wrong. It was fighting an opponent it couldn't see.

The Coalition was tricking Labor, but also deceiving the electorate. Deep down the Coalition did not believe there was a ''budget emergency''.

The costings showed the Coalition's measures will blow out the budget by $33.2 billion before reigning it in by cuts and savings totalling $42 billion. The net impact, $8.8 billion over four years, is so small as to be a rounding error. It amounts to 0.1 per cent of GDP.

In essence, the Coalition has no gripe with Labor's current budget stance. The measures it proposes axe some of the burdens on business but replaces them with others. It can afford to get rid of the mining tax by axing the measures it funded and funds a generous paid parental leave scheme by slashing Australia's projected foreign aid and refugee intake.

(The collapse in revenue of the mining and carbon taxes made the Opposition's job balancing the budget much easier.)

It is housekeeping of the kind we expect political parties to make, but it's inexcusable the Coalition waited until the very end to reveal its bottom line.

Several of the measures don't seem to add up. The saving attributed to removing the low income super rebate could only be achieved if it was effectively retrospective, that is by not paying out money due this year. The money booked from the 1.5 per cent levy on big businesses to fund the paid parental leave scheme appears to take no account of the lower company tax revenues likely as businesses claim it as a business expense.

''I found that after just five minutes examining the document,'' said Sydney University accounting expert Bob Walker. ''But without seeing what exactly they are costing, many of these things are not apparent. We are shown the totals and told three wise men have vouched for them, but not shown the detail of what it is they have vouched for.''

Hiring Geoff Carmody, the co-founder of Access Economics, Len Scanlan a former Queensland auditor-general, and Peter Shergold, a former head of the prime minister's department to ''review'' the costings seems like a political masterstroke. The Coalition released none of the detailed Parliamentary Budget Office costing documents that explained how the totals were arrived at, merely the totals themselves and a one-page letter from the chosen three saying they agreed with it.

Labor has had few policies to cost. Few of its announcements in the campaign are expensive. None approached $1 billion. Like most governments, it made its big announcements before the campaign.

And, as it happens, most have been adopted by the Coalition. They are no longer in contention. The National Disability Insurance Scheme, the four-year budgeted commitment to the Gonski education reforms, the four successive hikes in tobacco excise, the bank deposit levy to fund bailouts, the emptying of inactive super accounts, they are all now Coalition policy, despite what it may have said in the past.

Andrew Robb, the Coalition's finance spokesman, says the economy was always the Coalition's strength and Rudd defied orthodoxy by challenging it. ''Rudd is the guy who squandered the boom. That's the sentiment out there,'' he said. The former Liberal Party director who oversaw John Hewson's disastrous 1993 campaign says Rudd's has been the worst he has seen.

''It has been the most undisciplined and unprincipled campaign in my memory ? by a countrywide,'' he said. ''No narrative, except 'cut, cut, cut'.''

Robb is, of course, an adversary but there are plenty in Labor ranks who express even stronger denunciations in private, including some who backed Rudd back into the leadership.

''I mean you have a Noble Prize-winning economist who says we have the best economy in the world, that it's a miracle economy. Why aren't we telling that story?'' said one senior Labor figure.

The story is that real incomes have risen for Australians over the past six years, by more than $5000 per year for the average family. Interest rates are at record lows; unemployment and economic growth at impressive levels compared to other countries and the current account deficit well in hand.

Public debt is low as a percentage of GDP. Its rise was largely the result of the stimulus package during the global financial crisis and - says Joseph Stiglitz, the economist cited by the Labor figure - protected 200,000 jobs and probably saved the budget bottom line as well, given how it would have been ravaged by a recession.

''The obsession with public debt continues to be a distraction from the more fundamental question of how to establish long-term growth,'' Stiglitz wrote this week.

By attacking the Coalition's savings and budget management, Rudd played up to these overblown fears of debt and deficit. It was a continuation of the political missteps of the Gillard government, and its untenable vows to keep the budget in surplus.

And where Rudd did talk of the government's economic record during the campaign, it was more often about AAA credit ratings, not bread-and-butter issues, such as rising living standards.

Then there were the tactical howlers, including the verballing of the departments of Treasury and Finance last week over the alleged $10 billion hole in their costings and the public servants' extraordinary decision to release a public statement to clarify their position.

Add to that the $70 billion black hole that Labor knew did not bear scrutiny; the anti-GST scare; the on-the-fly policy of tax concessions for booming Northern Territory; the anti-foreign-investment rhetoric, and it made for a confusing campaign.

As the policies came thick and fast and from all directions, it seems to have left voters suspicious and unsure about what Labor stands for.

Abbott leads Rudd on who was best to ''handle the economy'' by 56 per cent to 36 per cent, according to the latest Nielsen survey. On trustworthiness, always the Opposition Leader's weak suit, Abbott leads by 44 per cent to 37 per cent, and the Prime Minister has slid 8 percentage points since July.

Rudd's communication has been as manic as his policy pronouncements: filled with jargon, delivered at rapid-fire speed and at great length.

Overall, Robb said it reinforced Rudd's reputation for chaotic management, the reason his colleagues tossed him out of power in 2010. ''Rudd and his team thought his popularity with the voters, his personality alone, would be enough to get them over the line,'' said the Labor figure. ''There was no plan once the election had been called.''

For Rudd and his colleagues, his erratic campaign must be sobering. It was his much vaunted campaigning skills and popularity that underpinned his return to the leadership.

Now, plenty are asking if his predecessor, Julia Gillard, would have done better.

But the problem with Labor's economic narrative goes back years. Former treasurer Wayne Swan was a poor communicator, and Gillard had little impact in countering the opposition's cost-of-living scare over the carbon tax.

Australians have never taken kindly to broken promises on taxation, as Paul Keating learnt in 1996, so Gillard provided her opponent with a potent weapon.

''An economic record is something you build up over years of consistent and methodical advocacy,'' said one Labor MP and Rudd supporter. ''We spent three years obsessing about our internal affairs. We were so preoccupied with tearing ourselves apart, we didn't build our brand ? You can never do it in a 33-day campaign.''

Most tellingly, in the past two elections, Labor has been led by recently installed leaders, unable to run on the government's record. Rudd's destabilisation of Julia Gillard hurt her government and made it difficult to sell her economic competence. He reaped what he sowed.

In the end, the ultimate source of Labor's inability to sell its economic credentials - and its likely electoral defeat on Saturday - is the party's indulgent in-fighting and defective political culture.

With Tom Allard, in The Sydney Morning Herald and The Age


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