ONE FORECAST can be made with absolute confidence: the 2009–10 Budget predictions, and those of its critics, will be wrong. The problem economic forecasters have (including those in Treasury advising the government) is that they can’t predict the future. Treasury always gets its forecasts wrong and these errors are revealed in the mid-year economic forecasts.
The tactics for this year’s Budget worked. The Treasurer leaked the bad news to the media, along with some of the good news (the pension increase), while warning that there would be pain. In the Budget lockup on Tuesday night it soon dawned on us that there was very little pain. There was the mildest of swipes at middle-class welfare, but provided we have a job we will hardly notice the Budget.
The failure to increase the dole, now almost $100 lower than the single pension rate, is unforgivable. The New Start jobless missed out in the October and December stimulus packages and they have missed out now in the Budget. The government’s curious argument is that being out of work is only a temporary condition, whereas the old need a pension permanently. Yes, but temporary or not, going hungry and living a miserable existence hurts. Single parents were also ignored once again. Surely we are not going back to the dark days of people muttering about teenage girls having babies to avoid going to work. If we don’t care about the single parent (almost always the mother), we should at least have a care for her children.
In his Budget speech treasurer Wayne Swan didn’t utter the word deficit, and in their attacks on him the opposition avoided referring to the global recession. Malcolm Turnbull again went on about the government misreading the economy when, at the beginning of 2008, it warned inflation was the greatest problem, causing the silly old Reserve Bank to put interest rates up more than they should have. But inflation was a problem then. The world changed in September of that year when Lehman Bros was allowed to go bust by the US administration. It’s been downhill ever since.
The Coalition is peddling a line that the level of debt is a disaster. The facts say otherwise. Government net debt in calendar 2010 will be near enough to 10 per cent of GDP. In the United States it will be close to 70 per cent; in Britain around 60 per cent; in the Euro area 70 per cent; and in Japan 115 per cent. The Budget deficit as a percentage of GDP is also modest by world standards, at 4.5 per cent. It’s 12.9 per cent in the US; 11.5 per cent in the UK; 5.3 per cent in the Euro area; and 6.3 per cent in Japan.
Wayne Swan is entitled for some years ahead to apportion a good deal of our difficulties to the bad economic management of the Howard government in the boom years. Some Liberals continue to hail Peter Costello as Australia's greatest Treasurer, yet he admits that John Howard played a major role in the construction of all his Budgets. Costello was intent on reducing taxes and spending, while Howard was keen on more spending, mainly in family benefits, and regional programs, as an election bribe. Costello told the authors of John Winston Howard: The Bigraphy about the contest between the two on economic management, and elaborated on the theme in Peter Hartcher’s new book To the Bitter End.
Costello continues to boast he paid off Labor’s debt. He fails to mention that the debt was necessary because of the recession of the nineties, or that he relied heavily on the sale of assets owned by taxpayers, such as airports and Telstra. This merely shifted government debt to the private sector, with no net diminution in national debt. Costello believed in nil government debt and relied on current revenue to pay for tax cuts, budget surpluses and infrastructure. There was little money left for economic infrastructure, hence the problem now faced by the Rudd government.
THIS YEAR’s Budget lockup was at least as tiresome for participants as last year’s. They seem to get worse each year and are lot different from the lockups of the fifties and sixties. Way back then, journalists were given a single document, plus the Treasurer’s speech. Getting at the facts was easy. Today journalists have to cope with a mountain of documents and getting to the facts is harder than ever. They need to read hundreds of pages of small type to put together a coherent account of the Budget.
There is no reason to continue with the lockup. It originated when Ben Chifley was prime minister, treasurer and leader of the government in the House. He would get to his feet in the House at 8pm and read his Budget speech, with the press furiously working to record every word. The Budget document would be released at this time. He was prevailed upon the by the press gallery to have a Budget lockup to give the newspapers time to properly cover the story.
Until globalisation made it easy to move money around the world, the government was concerned that no detail of the Budget could leak to the Australian Stock Exchanges on Budget day, giving some smarties the chance to reap a profit. No such concerns exist now, with investors able to buy and sell stocks and bonds around the world in an instant. The only reason for the lockup is to allow the treasurer to peddle his propaganda about the Budget at his press conference in the lockup. On Tuesday night Swan went for almost an hour at his conference. It also means that journalists can’t hear negatives about the Budget from the opposition and others until let out of the lockup at 7.30pm when the treasurer gets to his feet in the House to deliver the Budget speech. The Budget documents could be issued on an embargo basis to news organisations in their offices. There is no reason to believe the embargo would be broken. •
