ABC’s Alan Kohler Mauls Wayne’s MYEFO

30 Nov

In my opinion, ABCTV News ‘Finance’ and ‘Inside Business’ presenter, and Editor-in-Chief of Business Spectator Alan Kohler has increasingly shone as a rare beacon of (usually subtly hinted) truth in the mainstream economic commentariat over recent months. His excellent, pull-no-punches article today is very well worth reading. As Business Spectator viewing requires (free) registration, it is reproduced below in full. Suggest registering for his articles alone, and do follow @AlanKohler on Twitter.

Read on, dear reader (my emphasis added):

Wake up and smell a budget stinker

As everyone in business knows, a forecast is just a forecast. In times like these, it’s not even that; it’s a guess that you hope won’t look too stupid.

The World’s Best Treasurer has had to redo his budget because the one he did six months ago has turned out to be wrong. We told him at the time it would be, and so it was, but the new one looks worse – a shocker.

The forecast for GDP growth this financial year has been cut from 4 to 3.25 per cent, or by 19 per cent; the revenue forecast has been reduced by just 1.7 per cent.

Economic growth for 2012-13, about which nobody has the faintest clue, has been reduced by 13 per cent to 3.25 per cent. Revenue for that year has been trimmed by only 1 per cent.

Total tax receipts in 2010-11 were $280.8 billion (that’s the actual outcome, not a forecast).

In the current financial year receipts are forecast to be $315.3 billion – a rise of $34.5 billion, or 12.3 per cent. In 2012-13 they are now forecast to be $374.5 billion – $93.7 billion greater than the outcome for 2010-11, which is an increase of exactly a third.

Do these forecasts pass the smell test, Mr Chairman? No way Swanny, go back and try again.

In fact, what would happen if revenues for some reason turned to be flat for a couple of years? What would that do to our bottom line in 2013? Er, well, if that happened the 2012-13 deficit would be, um, $50 billion.

OK, how about this Wayne… given we’re facing the most uncertain economic outlook in our lifetime, with the prospect of a severe recession in Europe, possibly one in the US and a slowdown in China, and the probability of much lower commodity prices, the board will allow you to forecast revenue growth of no more than 5 per cent a year for the next two years. That would seem prudent, wouldn’t you say?

Now, as you know Wayne, we do need to run this business at a surplus in 2012-13 because we are facing a takeover from those bastards at Abbott & Co, so what would we have to do with expenses between now and then to report a surplus in 2012-13 under that scenario?

Well, um, that would mean revenue in 2012-13 of $308.7 billion. Actual expenses were $346.1 billion in 2010-11, so that’s a spending cut of $37.4 billion over two years, Mr Chairman. Right Wayne – the board thinks you should implement that.

That just illustrates the political importance of having implausible revenue forecasts that no one can disprove: $37.4 billion is a lot of welfare programs and/or a lot of public servants. Shadow Treasurer Joe Hockey says the Labor government has hired an additional 20,000 staff since 2007; sacking them all would only save less than $2 billion in salary and on-costs.

Will government revenues grow by 10 per cent between 2010-11 and 2012-13 or by 33 per cent, as forecast in yesterday’s MYEFO? Absolutely no one knows, least of all the bozos running Treasury’s macroeconomic models downstairs in Langton Crescent. But does 33 per cent revenue growth feel right, given everything we know about the world at the moment? Nah, it feels ridiculous.

But the wonderful thing about politics, as opposed to business, is that your board consists of executives who want spending cuts even less than you do, and you get to have a press conference at which you announce forecasts and guesses as if they have happened already. No wonder the world is a mess.

Bravo Mr Kohler!

Bravo!!

Now, please note that the above recommendation is not to say that I agree with everything Mr Kohler says. On the contrary, I still find him guilty of occasionally (and hopefully, inadvertently) perpetuating many of the various myths and falsehoods underpinning our Great Australian Housing Bubble, as just one major point of difference.  However, I have been sufficiently impressed with Mr Kohler’s subtle (and sometimes not so subtle) hinting at the truth about both the Australian and more particularly the global financial situation over recent months, that I am happy to give a firm-yet-guarded recommendation.

Given that Mr Kohler is not only “mainstream”, but also a presenter on Their ABC, that is high praise indeed.

(h/t Twitter follower @kawunnee for bringing this article to our attention)

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3 Responses to “ABC’s Alan Kohler Mauls Wayne’s MYEFO”

  1. John Comnenus November 30, 2011 at 12:21 pm #

    But Wayne is the greatest treasurer. The problem is on the expenditure side not revenue.

    The ALP have oversaw the best terms of trade and biggest resources boom ever and left us swimming in debt. Their solution is the MRRT and Carbon Tax to shore up the balance sheet. The spin is they are spreading the benefits of the (now rapidly ending) boom. All that debt has left every current Australian and many future tax payers worse off because they are liable to pay back the princinple and the interest. Everyone is worse off.

    The Howard Government oversaw 9/11, the tech wreck and Asian crisis. They paid off debt and provided for future unfunded liabilities. That left every tax payer and future tax payer better off. They spread the benefit of economic growth to every taxpayer in the country. The moral to the story is that fiscal discipline spreads benefits to every Australian, increased spending and taxes takes wealth off every Australian.

  2. Twodogs November 30, 2011 at 1:56 pm #

    There’s no other explanation than the other so-called “economists” are lying, card-carrying laborites. How embarrassing for them to defend what even the ABC does not. Instead, we get dickheads like Gittins kicking the farmers in the teeth. He even used the analogy about the dog that didn’t bark. That would be Gittins not saying a word about the budget.

  3. kelly liddle November 30, 2011 at 9:37 pm #

    Yes it is good when the usually quietly spoken Alan Kohler gets stuck into the government because people like him can actually have an influence. We do have the best treasurer in the world though. Remember he was given such an award only a few months ago which was also recieved by Keating. Bring back the not so good treasurer Peter Costello or at least the Coalition.

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