Menzies left Australia in far worse financial shape than he found it, at least according to treasurer Joe Hockey’s favouritedebt and deficit benchmark. Having inherited budget surpluses from the ChifleyLabor government, the Menzies Coalition government ran small budget surpluses from 1949-50 to 1957-58.
But then Menzies' “irresponsibleprofligacy” began, running budget deficits for the last nine years of his reign.
Between 1958-59 and 1966-67, Menzies averaged budget deficits of 1.8% of GDP. His biggest deficit of 3.3% of GDP in his final year in office was larger than the lastSwan deficit, which the Abbott government has called a “disaster”and a “budgetcrisis”.
The simplistic notion that a deficit is evidence that agovernment is “living beyond its means” is complete economic nonsense. Leaving aside that historic and international evidence provides no support for the claim that budget deficits cause long-run economic problems, the argument is contradicted by the corporate decision making that politicians pretend to emulate.
Contrary to virtually every word spoken by our political leaders, there is absolutely no relationship between a budget surplus and a profit. They aren’t just different concepts, they are unrelated concepts. They have nothing in common except that people generally think both of them sound good.
