Gittins Nails ‘Rudd’s Budget Trick’

17 May

Economics Editor for the Sydney Morning Herald, Ross Gittins, hits the nail squarely on the head in critiquing the latest Budget, and at the same time, smashes the lamestream media’s pathetic reporting of the Rudd smoke ‘n mirrors ‘trick’:

The annual debate about the budget gets ever more unreal. This year it reached the height of absurdity. Budgets used to be about what the government plans to do in the coming financial year. Now they’re about what supposedly will happen any time over the next four years.

How unreal can you get? Who on earth knows what will happen over the next four years? No one. Certainly not Treasury (nor any of the smarties who think they know better than it). This time last year Treasury’s best guess was that unemployment would peak at 8.5 per cent next year; now we know it peaked at 5.8 per cent in the middle of last year.

This time last year we were told revenue collections over five years would be down $210 billion on what the ”forward estimates” had told us the year before. Now we’re told they’ll be down $110 billion – but why would you set much store by that guess? We know from repeated experience that Treasury is quite bad at telling us in early May what the budget balance will be at the end of the following month. And yet we take seriously what it says the balance will be in three or four years’ time.

This year there’s been huge emphasis – encouraged by the government’s rhetoric and amplified by the media (including yours truly) – on one figure: the projected budget balance in three years’ time, a surplus of $1 billion. Hallelujah! Home and hosed. All over bar the shouting.

How absurd can you get? Treasury isn’t even prepared to dignify this figure with the status of a ”forecast”? It’s the product of a completely mechanical, punch-in-predetermined-numbers ”projection”. Here’s another absurdity: the public debate about the budget treats all its figures as if they were accomplished facts. No ifs or buts or maybes. And do the purse-string ministers – who know better than anyone how unreliable these figures are – make it their responsibility to warn us not to take them too literally? Not a bit of it.

Here’s Lindsay Tanner: ”The result is that we are back in surplus three years ahead of schedule in three years’ time and the level of debt Australia has will be half of what was initially projected” (my emphasis).

Last year’s projection was rubbish, but this year’s is fact. Of all the (inescapably) rubbery figures in the budget, the one we’ve fixated on is the rubberiest: the $1 billion cash surplus in 2012-13. The one thing you can bet on is that the budget balance that year won’t be a surplus of $1 billion.

This relatively recent shift from focusing on the budget year to taking a blurry look at the next four years has made it easier for governments to manipulate our perceptions of the budget. And boy, weren’t the pollies working hard at it this year.

Read the rest of Gittins’ detailed and brilliant critique here.

Advertisements
%d bloggers like this: