cartoon arguments that cut both ways

One of the better stories on the budget.





MALCOLM Turnbull has Labor’s budget all wrong. So does Kevin Rudd.

The Opposition Leader wants to pin the entire deficit on Labor.

The Prime Minister wants to have it both ways by blaming the global recession and the previous Coalition government for the hole in the budget. Yet Rudd also claims credit for the stimulus, which must surely add to the deficit.

To see through the cartoon arguments, voters of both sides need to understand what chunk of the deficit belongs to Labor spending decisions.

The surprise, once the numbers are allowed to speak for themselves, is the budget is the smallest component of the deficit.

Most of Labor’s spending between 2008-09 and 2011-12 came in its first two stimulus packages and in the extra funding to the states. The budget itself neither blew out the deficit, nor drastically reined it in.

In other words, its contribution to fiscal policy is more boring than either party wants to admit.

Here’s how the figures stand to date. Wayne Swan’s first budget predicted surpluses of roughly $20 billion a year between 2008-09 and 2011-12 for a total of $79.24 billion. These paper surpluses have now turned to deficits totalling $191.28 billion - a turnaround of $270.52 billion.

Labor’s spending over the period is $97.16 billion, which translates to 35.9 per cent of the deterioration and half (50.8 per cent) of the total deficits.

Now the punchline: the budget added just $29.15 billion in new spending over the four years. The pay rise for age pensioners and carers represent a third, or $10billion of that amount.

The real spending was done before the budget, when Labor committed $68.01 billion over the four years.

Grossing up the figures is itself misleading because the first two years, 2008-09 and 2009-10, are recession years when governments would reasonably be expected to front-end load their stimulus. So let’s look instead to the full recovery year, 2011-12, to get a better gauge of the structure of the budget.

A projected surplus of $18.87billion for that year is now a deficit of $44.53 billion - a turnaround of $63.4 billion.

This is the bit the Coalition will want to ignore. Labor’s spending in 2011-12 is worth $13.2 billion, of which $6.95 billion came from the budget. The remaining $50.2 billion gap is largely Peter Costello’s doing. He left behind a budget structure that couldn’t return to surplus on its own steam in recovery.

The problem is neither side of politics is prepared to recommend cuts deep enough to close the structural deficit.

Readers note: There has been a lot of debate on this site, and others, about the structure of the budget. Before anyone fires off a reply to this piece, have a good look at the graph. I want to see if we can debate the data without reverting to pre-existing partisan positions.


George Megalogenis .. The Australian May 18, 2009