After last week’s appalling effort, the resort to misleading practices in the budget is reaching the point where the public’s disrespect and distrust of politicians are spreading to the formerly authoritative budget papers.
We’re used to spin doctors with slippery words. Now it’s spin doctors with slippery numbers. They’re not just gilding the lily, they’re creating an unreal world where the truth is concealed.
It gives me no joy to be telling people not to believe what they read in the budget papers. I’d rather tell them that of course the budget figures can be trusted, and they should heed the advice of the nation’s most senior and respected economists.
I have great respect for most of our econocrats who, at base, care about our economic success, try hard to make their estimates realistic and are at pains to avoid saying things that could mislead.
The problem is that a politicised and demoralised public service is under continuous pressure to help their political masters mislead the public.
The truth about this budget is that a government that’s had surprisingly little success in reducing the budget deficit and halting the growth in its debt decided to ignore its solemn commitments to “bank” any improvement in its position and to achieve a surplus of 1 per cent of gross domestic product “as soon as possible”. Rather, it would have a big tax cut, largely for political reasons.
This should have led to a noticeable delay in the timing of the return to surplus and delay before the debt started going down rather than up.
Instead, we were presented with a budget purporting to show a faster return to surplus despite the tax cut. We could have our cake and eat it.
How was this miracle performed? By an unexpected actual surge in tax collections that was probably a one-off, but was taken to presage a continuing improvement.
Plus overly optimistic forecasts of economic growth, combined with the magic of medium-term projections assuming continuous strong economic growth out to 2028-29.
In the former Labor government’s last budget, of 2013, Wayne Swan introduced two hugely expensive “legacy” programs: the National Disability Insurance Scheme and the Gonski needs-based school funding.
Swan made the schemes seem affordable by phasing them in exceptionally slowly, with the bulk of the cost crowded into the two years immediately following the four years of the “forward estimates”, where they couldn’t be seen.
Even so, he provided “medium-term projections” out 10 years to 2023-24, which showed the budget deficit projected to return to balance in 2015-16, before soaring to a surplus way over 1 per cent of GDP just three years later. Net debt would peak at 11.4 per cent of GDP in 2014-15, then fall to zero in seven years.
The two graphs showing the budget balance soaring up to surplus and the net debt gliding down to zero are truly inspiring and worth looking up (page 3-32).
To Swan, these projections were proof positive that his expensive new spending programs were “fully funded”.
After Labor’d been thrown out, a senior econocrat reproached me for failing to detect that these fabulous projections relied for their magnificence on a “magic asterisk”. Huh? An assumption that real growth in spending would be held to 2 per cent a year, on average.
Swan claimed in successive budgets to be achieving the 2 per cent cap. He never did, in any year. But the “on average” allowed him to claim advanced credit for good intentions in future years.
This year’s is the Wayne Swan Memorial budget. It uses just the same tricks to create just the same illusions.
You promise tax cuts worth $140 billion over 10 years, but with only 10 per cent of that cost hitting the budget in the first four years of forward estimates, and the remaining 90 per cent hidden by a projection methodology that assumes smooth sailing and Scott Morrison’s claim to be able to achieve unprecedented restraint in spending.
Swan was a master of “reprofiling” – shifting receipts and payments around to keep the budget balance looking like it’s heading in the right direction and disguise the trouble you’re having paying for promises you can’t afford.
This budget’s full of reprofiling, including a one-off draw-forward of tobacco excise timed to help in a tough year and the temporary disinterment of the low-income tax offset so the tax cut can start seven weeks after budget night but not hit the budget until the following financial year.
But the more treasurers use the budget papers to mislead us, the more they foul their own nest, demeaning their great office, discrediting the documents they produce with such flourish, and disheartening the econocrats who used to be proud to work for Treasury.
