Bracing For Another $50 Billion Deficit

12 Mar

No surprises here:

Company tax slump threatens surplus plan

If company tax receipts perform as poorly in the June half year as they did in the December half, the government will face a deficit this year approaching $50 billion.

It would be beyond the reach of the creative accounting evident in last November’s budget update to turn this into a 2012-13 surplus.

Treasury secretary Martin Parkinson yesterday underlined the serious weakening in the structural budget positions of both commonwealth and state governments.

Tax has fallen as a share of GDP by four percentage points since the global financial crisis, equivalent to a shortfall of about $60bn a year.

It “is not expected to recover to its pre-crisis level for many years to come”, he said.

Nearly two weeks ago, Barnaby Is Right readers saw that the government’s management of the budget for this financial year was tracking almost identically to 2010-11, when Labor delivered a record $51.5 billion deficit:

According to the RBA, Labor has racked up a $30.26 billion loss for the first half of 2011-12:

That’s just $3 billion less than the record deficit they racked up for the first half of 2010-11:

Now, it is worth recalling that in the November MYEFO budget update, Wayne had to revise his original May budget “estimate” for a $22.6 billion deficit this year. He told us it would blow out to $37.1 billion.

Don’t you just love economic forecasting?

$22.6 billion deficit, forecast in May.

$37.1 billion, forecast in November.

$5? billion deficit actually achieved, at the end of June.

But never mind all that.

We are all going to believe the headlines, and the TV sound bites, and the rants in Question Time, when Wayne and Co. loudly proclaim that much-promised “return to surplus” in the May budget.

Even though it will be nothing more than a forecast.

With even less credibility than all four of their previous #epicFAIL budget forecasts.

There are only two chances of Labor achieving anything like a surplus in 2012-13.

Buckley’s. And none.

Wake me up on June 30, 2013, dear reader.

Then we shall see just how large a budget deficit for 2012-13 Labor actually delivers.

4 Responses to “Bracing For Another $50 Billion Deficit”

  1. Twodogs March 12, 2012 at 8:32 am #

    Why are they delivering a deficit at all? Whatever happened to Keynesian economics? What, spend in the bad times, and spend in the good times? What for? On what basis? The 2012-13 surplus forecast was just to buy time, but it was never justified in the first place! Maybe they know the second dip of the double dip recession would happen about now, in which why don’t they use such a talent in running the country?

    I wouldn’t be surprised if they put back a lot of 12/13 spending into 13/14 and still deliver a deficit. A compliant media is their savior? Ross “apolitical” Gittens will run a series of articles saying how “there’s more to life than money” and Keynesian economics, govt apologist crap, blah blah blah. See? I’m a psychic, just like TBI!

    • The Blissful Ignoramus March 12, 2012 at 8:46 am #

      The reasons why the government is chasing a reported surplus are two-fold, Twodogs. First, politics – they’ve promised one, and so pinned their politico-economic credibility (such as it is) to the mast. Second, and far more important, if they don’t achieve something like a surplus, our system will collapse a la Ireland, et al. That’s because the ratings agencies know that our banking system is a house of cards, massively exposed to the housing market, that was propped up by the Govt using implicit and explicit guarantees in the GFC. Moodys Ratings et al have expressly stated that those govt guarantees are worth at least two ratings notches for our banks. Since our sovereign balance sheet is now effectively propping up the banking system (thus economy), if the govt does not show a credible path back to surplus (and actually achieve it), the credibility of the sovereign balance sheet to support continued and further guarantees for the banking system won’t wash anymore – thus, our banks will have their credit ratings slashed (already begun through 2011), interest rates will go up as they struggle to acquire more offshore loans needed to keep our housing bubble inflated; higher interest rates for mortgagees will break our last-in-the-West housing bubble, and down will come baby cradle and all.

      • Twodogs March 13, 2012 at 8:50 am #

        The banks have now shat on the RBA and will raise interest rates at will. Soon it won’t even be news but it will be when the economy goes “pop”!

        I tried convincing a woman at work to buy her next house in a deflated US market, but of course that would be diversifying. Instead, she’s off to buy some declining and dodgy Brisbane real estate.

        I’m already facing zero bonus and zero pay rise this year and inflation will take care of the rest. Misery loves company, as they say.

  2. Kevin Moore March 12, 2012 at 12:10 pm #

    When governments borrow what is inappropriately called money from Banks, the Banks merely monetise the governments signature on the promise to pay . The Banks put up nothing of value. The real value in the loan is the collateral as provided by the Australian people.The banks at the press of computer keys create the money out of thin air.

    Why do we pretend that we have to pay back something which in reality does not exist?

    Why should we use as collateral things that have real value in exchange for something that Banks create out of thin air?

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