Tanner Lies About Budget, GFC

Finance Minister Lindsay Tanner has demonstrated yet again that he is a liar and a fraud:

Lindsay Tanner today accused the Opposition of punching a $2 billion hole in the budget after it helped defeat a means test on the private health insurance rebate last night.

“Tony Abbott and the Liberal Party are blocking almost all the government’s major initiatives in the Senate these days,” Mr Tanner told ABC radio.

“We faced a huge budget problem as a result of the global financial crisis. We have to repair the damage to the budget and we have to get the budget back into surplus as quickly as possible.”

“Yet he’s punched a huge hole in our savings initiatives that are designed to get the budget back into surplus quickly.”

In a recent column for the Sydney Morning Herald, ironically and hypocritically titled “Dishonesty in the debt debate”, Lindsay Tanner wrote:

Why are we going into debt?  Because the global financial crisis punched a huge hole in our projected revenues, and forced us to act to support the economy and to sustain jobs.  Had we just sat back and watched, as our opponents seem to suggest, we would have seen unemployment rise dramatically. That would have reduced tax revenues even further, and thus pushed us into deficit anyway… The Rudd government had no choice but to intervene to protect Australian working people from the ravages of the crisis.  The dishonest campaign about debt being prosecuted by our opponents should be seen for the fraud it is.

Tanner’s claim that the GFC “punched a huge hole” in the government’s projected revenues, is an outright lie. And I will prove it to you, from the government’s own Budget documents.

The real reason that Rudd Labor faces a “huge budget problem” is not a result of the global financial crisis. Instead, it is entirely a result of their panicked, monumentally incompetent response to the idea of a GFC.

The simple fact is this: Contrary to Tanner’s recent claim, and Labor’s shrill proclamations throughout 2009, the GFC barely affected Australian government revenues at all. The “huge budget problem” is entirely of the Rudd Government’s own making. Because their team of uneducated economic illiterates panicked, and went on a massive, unnecessary spending binge. And now they are lying to cover up that fact.

Want proof?

Take a look at the Government’s 2009-10 Budget, Statement 10, released in May 2009.  It shows that Government income (“Receipts”) was estimated to be down by just $7.8bn (2.7%) on the previous year –

Now take a look also at the Government’s updated Mid-Year Economic and Fiscal Outlook (MYEFO) 2009-10 Budget statements. These were released in November 2009. Appendix B shows that by November last year, the Rudd Government were expecting an even greater improvement in income (“Revenue”) –

We can see that by November 2009, it was clear that government income would in fact be slightly higher than had been expected for the previous year (2008-09).

Quite simply, the GFC did not blow any holes in the budget at all. As recently as November, the Government fully expected its revenues for this year to finish higher than they were for 2008-09.

So, why is there a problem with the budget then?

Rudd Labor’s massive spending!

Take a look at those “Payments” figures again, as estimated in the May 2009 Budget –

Now compare to the updated Budget numbers in November 2009, in the Mid-Year Economic and Fiscal Outlook –

Three important things to notice.

Firstly, the government had revised up its original estimate for “Receipts” in the 2008-09 year, by $2.8bn.  So they had received more income than originally expected for that year.

Secondly, the government had also revised up its original estimate for “Payments” in this year, 2009-10, by $1.8bn. In other words, in just 6 months between the May 2009 Budget and the November 2009 MYEFO, their “Payments” (ie, spending) blew out by $1.8bn over the original estimate.

Thirdly, notice that the government “Payments” figure of $338.39bn for 2009-10, is an increase of $22.347bn on 2008-09. And that was an increase of $44.203bn on 2007-08.

In summary then:

In the most recently updated Government budget figures, for the 2007-08 year the budget showed “Receipts” of $294.917bn, versus “Payments” of $271.843bn.  That is, a Howard Government-delivered surplus of $23.074bn.

By November 2009, the Budget MYEFO (Appendix B, Table B1 above) showed that Rudd Government “Receipts” were expected to be down by just $3.01bn compared with 2007-08, and a mere $0.77bn compared with 2008-09.

Simply, the GFC has actually had almost nil impact on government revenues. We can see that even back in the May 2009 Budget, the government had  estimated only a 2.7% fall in “Receipts” for 2009-10 compared with 2008-09. Lindsay Tanner lied.

Rudd Government “Payments” (spending), however, are a very, very different story.

In 2007-08, Government “Payments” were $271.843bn. But by November 2009, the Rudd Government’s MYEFO (Appendix B, Table B1 above) shows that “Payments” have blown out to an estimated $340.166bn.  That’s a massive increase in annual government spending – an extra $68.323bn per annum versus 2007-08, and an extra $24.12bn versus 2008-09.

As you can see, Lindsay Tanner lies when he tries to blame the GFC for the Rudd Government’s “huge budget problem”.  There is almost no loss of revenue – the “huge hole” in the budget is entirely due to panicked, massive, wasteful Rudd Government spending.

Lindsay Tanner lies when he accuses the Opposition of punching “a huge hole in our savings initiatives”.  The $2bn “savings” related to the health care rebate – a broken election promise by Rudd – is a tiny fraction of the massive spending spree that Tanner’s team have done in two short years. And it is a tiny fraction of the $48.49bn in Interest-only debt repayments, that we-the-taxpayers must pay back in just four years to 2013.

Lindsay Tanner lies when he claims the Rudd Government has “savings initiatives that are designed to get the budget back into surplus quickly.”

The Rudd Government has no plan whatsoever to return the budget to surplus.

They are still borrowing well over $1 billion a week.

And their “plan” is nothing more than hope. The hope that another China-fueled mining boom will rescue the budget for them. This is an increasingly ridiculous hope, as more evidence emerges almost daily of huge structural problems in China’s property and banking sectors.

Lindsay Tanner certainly will not tell Australia the simple truth. That our debt is too big already.

The facts of history show, we cannot pay it back.

UPDATE:

We also know the government is lying about the budget, because buried in the 2009-10 MYEFO budget papers is proof that the government has fiddled the books. Specifically, to “hide the increase” in government spending as a % of GDP.  See my article here.