“The visionary lies to himself, the liar only to others.”

“The visionary lies to himself, the liar only to others.”

By Kaye Lee on May 20, 2014 • ( 19 )

The
Charter of Budget Honesty was introduced to stop incoming governments
from claiming the previous government lied about the true state of the
nation’s finances.  The heads of the Treasury and the Finance Department
are required to put out their own set of numbers, the Pre-Election
Fiscal Outlook (PEFO), during the election campaign. This gives a
neutral baseline against which we can assess the new government’s
figures. PEFO is the only set of Budget forecasts that truly belong to
the bureaucrats – all other documents (like the Budget) are issued by
ministers.


The outlook in PEFO was remarkably close to the figures in the
Economic Statement issued by Chris Bowen and Penny Wong just before the
election was called. The public servants in PEFO projected the Budget
balance out for a decade. They found that the Budget was on track,
before the election, to return to surplus in 2016-17 and keep improving
from there, eventually hitting a surplus of about 1% of GDP by 2023 with
net debt approaching zero.


Despite the Charter and the neutral numbers in PEFO, Joe Hockey still
played the Budget black hole card. The new government’s mini-Budget
(MYEFO) contained dramatically bigger deficits than the bureaucrats’
PEFO projections, with no surpluses in sight.


The line Hockey
has been pushing is that not only did Labor hide the level of deficits
in the current budget cycle, but that it left a series of hidden
spending commitments in the unpublished years beyond forward estimates.

“From 2017-18, payments are projected to increase
substantially (a real increase of almost 6 per cent in just one year)
because Labor back-ended expenditure in a number of key areas and hid it
from the public.”

Strange….this member of the public was able to find all those figures without the aid of any staff.  In fact PEFO
specifically says “Specific program estimates are included across the
ten years for DisabilityCare Australia, the National Plan for School
Improvement, and the Nation Building 2 and Nation Building 3 programs.”


Labor in fact revealed the funding for the National Disability Insurance Scheme in the budget last May, with new spending broken down out to 2019.

“The Australian Government will provide $19.3 billion
over seven years from 2012-13 to roll out DisabilityCare Australia
across the country. This brings the Australian Government’s total new
investment in DisabilityCare Australia to $14.3 billion over the period.


The Australian Government will provide funding of $11.7 billion to
DisabilityCare Australia in 2019‑20, the first year after full national
rollout. This represents 53 per cent of the $22.2 billion total cost of
running DisabilityCare Australia, with the States and Territories
providing the remaining funding.”

This was to be funded by the increase to the Medicare levy.


Likewise the spending for the Gonski reforms was spelled out in detail as was its funding.

“The Budget provides an additional $9.8 billion over six years from 2014‑15 for new needs-based school funding arrangements.


To ensure that the National Plan for School Improvement will be fully
funded, the Government has needed to make tough decisions — redirecting
savings from higher education, self-education tax deductions and
business taxation; and better targeting family payments.


In addition, a range of national partnerships for education will be
ceased (or not renewed) and funding will be redirected to the National
Plan for School Improvement. As well as helping pay for this historic
reform, these saving decisions will also will help improve the position
of the budget in the next few years.”

Labor copped a lot of flack for its proposed cuts to university
funding, which were really a smaller increase rather than an actual
cut.  The reason they are opposing these savings now is because they
made the cuts to fund education reforms, not to spend on roads.


Hockey also bemoaned supposed hidden funding increases to foreign aid and defence.

“The fact is Labor’s left us with a massive forecast
increase in foreign aid, a massive increase in defence – for example in
one year, there’s meant to be a real increase in defence spending of 13
per cent, a 66 per cent increase in foreign aid.”

The increase in foreign aid was also in the budget papers — it was
actually a reduction on previously proposed spending, with the
government’s Millennium Development Goal commitment to lifting foreign
aid to 0.5% of gross national income put back another year to 2017. The
government spelt out its planned increase in foreign aid up to and
including 2017-18.


As Crikey pointed out in April,

“Labor invited the Prime Minister to spell out the
government’s MDG policy, which he duly did: aid is to reach 0.5% of GNI
when the budget returns to surplus. Which raises the question of why, in
Hockey’s Mid-Year Economic and Fiscal Outlook in December, Hockey left
Labor’s MDG aid funding increase intact, in defiance of the government’s
own policy. The answer, of course, was that it would inflate the budget
deficit for 2017 and beyond.”

And on defence, the budget tells us that defence spending for the
2014-15 financial year will rise by $2.3 billion to $29.3 billion, a
real increase of 6.1%, with a commitment to building defence spending to
two percent of GDP within a decade.  So it seems that wasn’t a nasty
surprise either.


Interestingly, the Labor budget also said “Government has chosen not
to offset the hit to revenue in the near term, as it would come at
significant cost to jobs and growth.”


In a budget press release, Joe Hockey said

“While the former Government left Australians with $123
billion of deficits and no path back to surplus, our budget repair
efforts have meant that deficits in our first four years are now
projected to be $60 billion, with a surplus of well over one per cent of
GDP projected by 2024-25.”

Ummmm, according to Treasury and Finance, Labor policies would have
got us to surplus in 2016-17 with a surplus of 1% of GDP by 2023.


Hockey goes on to say

“Gross government debt is now forecast to be $389 billion
in 2023-24, compared with the $667 billion left behind by the former
Government.  This reduction in projected debt of nearly $300 billion
also assumes that we provide future tax relief to address bracket
creep.”

I am not sure why he keeps talking about gross debt, I assume because it is a bigger number, but he really should look at the government’s own website which says

“The August 2013 Pre-Election Economic and Fiscal Outlook
(PEFO) estimated that net debt would rise to 11.7% of GDP in 2013–14
and peak in 2014–15 at 13.0% of GDP. These levels of net debt are not
unprecedented in Australia. Between 1970–71 and 2011–12, net debt level
as a percentage of GDP exceeded 10.0% ten times (mainly in the
1990s)..…compared with other advanced economies, Australia’s net debt
levels are comparatively low, and have been for some time.


The PEFO projected a return to surplus of 0.1% in 2015–16.


Although Australia’s fiscal balance fell to a low in the context of
the GFC, its structural budget balance is reasonable compared to other
advanced economies.”

When Hockey says that Labor left us with a debt of $667 billion, he
is quoting a figure from his own MYEFO document which included his
decisions to cut revenue from the mining tax, the carbon tax, the 15%
tax on superannuation income over $100,000 a year, and the Fringe
Benefits Tax rort on novated leases.


It also included his inexplicable decision to hand $8.8 billion of
borrowed money to the Reserve Bank. The sale of Medibank Private — a
$4-5 billion contribution to the budget — will be spent on roads because
Abbott wants to be an “infrastructure prime minister”, when it could
cut the budget deficit or the debt. That could be $13-14 billion off the
deficit and debt right there — or an interest saving of more than
half-a-billion dollars a year.  Scrap the company tax decrease, scrap
the Paid Parental Leave scheme, close a few corporate tax loopholes and
tax concessions for the wealthy and we would be well on the way to
addressing the challenges of the future.


So what it boils down to is that Hockey confected a large future debt
to justify ripping the heart out of our most vulnerable so he can say
he is being “responsible” by getting the young, the sick, the
unemployed, the elderly, the disabled, the single parents, and anyone
else who doesn’t have a voice, to pay for his claim that he might
improve his own fictional bottom line in ten years’ time.


In the mean time we will give up the Gonski reforms, the real NBN,
all action on climate change, environmental safeguards, research,
renewable energy, hospital funding, universal healthcare, the ABC…all
while sending a large percentage of the population into poverty.


The carbon tax doesn’t sound so bad now, does it?


“I’m not upset that you lied to me, I’m upset that from now on I can’t believe you.”


― Friedrich Nietzsche