How on earth did we convince ourselves this bunch would be miles better at fixing the budget than the last lot?
Joe
Hockey claims his midyear budget update is an honest assessment of the
state of fiscal affairs he inherited from Labor. It isn't.
Rather,
it is an attempt to lower our expectations about the speed and ease
with which the Coalition will be able to get the budget back on track.
He won't be able to achieve it for many years - he's not saying when -
and not without significant and painful, but as yet unidentified, cuts
in government spending.
In short, he is unlikely to be able to do
it much faster than Labor would have. What's likely to differ is who
will bear most pain. Labor would have erred in the direction of higher
taxes, particularly on the better-off. Hockey has ruled out higher taxes
and is hinting at cuts in government spending on "welfare, education
and health".
Contrast this grim slog with all the Coalition said
in opposition about the budget deficit being purely the result of Labor
mismanagement, which it could quickly put right if only it was in
government.
This time last year Tony Abbott and Hockey were
promising to deliver a budget surplus in each year of their first term.
By the election campaign the return to surplus had been delayed until
the first year after the next election. Now even that's in doubt.
Hockey
claims the midyear review and the latest deficit estimates it contains
draw "a line in the sand". From now on, he says, he will take
responsibility for budget estimates. In truth, he is trying to shift the
goalposts in his favour.
Although the pre-election budget
statement, certified by the most senior econocrats, was specifically
instigated by the Howard government to remove all doubt about the true
state of the budget at election time, Hockey is claiming to have
uncovered a budget black hole.
This financial year's budget
deficit is now expected to be $17 billion bigger, while the cumulative
deficits for the next four years are expected to be $68 billion bigger.
Little of this can be fairly attributed to the previous government.
More
than 60 per cent of the expected worsening in this year's deficit is
attributed to decisions made by the Abbott government, most particularly
the capital grant of almost $9 billion to the Reserve Bank, which the
Reserve didn't ask for and Treasury recommended against.
It
represents a piece of creative accounting, loading up the deficit in the
year for which Labor can be blamed so as to improve the deficit in the
years for which the Coalition will be responsible.
When you look
at the expected deterioration over four years, however, 80 per cent of
it is attributable to the worsening in the outlook for the economy just
since the election. Hockey is trying to shift the blame for this
deterioration on to Labor but, in truth, if it comes to pass it will be
caused by factors largely beyond the control of any government.
Hockey
is right in his claim that government spending grew a lot faster under
Labor than it tried to have us believe. He is right, too, in saying the
present prospect of another decade of deficits cannot be accepted.
We
are being softened up for a tough budget in May. What remains to be
seen, however, is whether Hockey and Abbott have the toughness needed to
get the budget back on track and do so without damaging the economy in
the short term or sharing the pain unfairly.
