This budget less dishonest than last year's

When it comes to forecasting the economy - and thereby the budget balance - the econocrats of the Reserve Bank and Treasury are on a hiding to nothing. When they get it pretty right that's no better than it should be. But when they get it wrong - for whatever reason - they're fools and probably knaves as well. The obvious truth is no economists are consistently good at forecasting the economy. It's those non-economists who...

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Worry more about the economy than the budget

Most of those who take a political approach to the budget assume that if it's in deficit, the way you get it back to surplus is to cut government spending or, if you're a really bad person, increase taxes. They forget it's the budget itself that's supposed to do the heavy lifting. When the severe recession of the early 1990s turned Paul Keating's budget surpluses into big deficits, he told people not to worry: as the economy...

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Swan's last budget: weird in a good way

This is the weirdest budget you or I are ever likely to see. That doesn't make it bad - just very strange. With just four months until the election, it's the most unlikely pre-election budget you could imagine, with loads of nasties and next to no sweeteners. It is more like a post-election budget, particularly the kind you get after a change of government. But its strangeness doesn't end there. The Parliament has so few weeks...

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Budget becomes Canberra's con job on the nation

Tuesday night's budget may have become the central plaything in the dog fight between Labor and Liberal, but its economic importance is a shadow of what it used to be. It suits no one in Canberra to admit it - not the pollies of either side, the econocrats, the business lobbyists nor the journalists - but these days the budget is not of great significance in the macro management of the economy. True, it's still of great newsworthiness...

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How to worry about the budget deficit

Far too much fuss is being made about this year's budget because politics has overtaken economics. I'm adding to the fuss, of course, but at least I'm trying to help people assess the economic significance of all the political argy-bargy. When we see the budget on Tuesday night the deficit is likely still to be very big. How worried should we be about that deficit? And how urgent is it for the government to get the budget back...

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The economic geography of big cities

If you've seen those ads the mining industry is running you probably realise the entire economy is riding on the miners' backs, and if asked to pay another dollar more in tax they'll up sticks and shift their mines to some better-run country like Peru or Nigeria. If you've spoken to a farmer any time in the past 50 years you'll know it's actually farming that's propping the economy. In either case you'll be surprised to know...

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Pain hits business before it hits the budget

As we approach the budget next week we're hearing a lot about how the strangely weak growth in nominal gross domestic product has hit tax collections, particularly from company tax. But we're hearing a lot less about what this implies is happening to the "real" economy. What's causing nominal GDP to be so weak - weaker than real GDP - is that although the prices of our mineral exports have fallen a fair bit, the dollar hasn't...

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Ghost of Costello haunts Swan's budget

If you're a rusted-on supporter of the Coalition there can't be a shadow of a doubt that all the budget problems we're hearing about are the product of the Gillard government's incompetence. And if you don't think much about economics, it's perfectly believable. After all, the budget had been in surplus for eight years straight when the Howard government lost office in late 2007. In that time Peter Costello not only paid back...

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AUSTRALIA’S POLICY MIX

The economy isn’t travelling too badly at present, but if you listen to what you hear from much of the media, you could be forgiven for thinking it’s in terrible shape. There are several reasons why the economy’s doing a lot better than many people imagine. A fair bit of it is political: if you don’t like the government it’s easy to conclude it must be making a mess of the economy. The world economy is not growing strongly and...

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What it's like to be genuinely poor

Don't be too alarmed by all the talk of budget black holes and everything being on the table in Julia Gillard's search for savings. It's more likely we're being softened up for a lot more budget deficits than for a horror budget in two weeks' time. Even so, it's clear there will be more cuts in spending and tax concessions. And though they're hardly likely to be draconian, you can be sure they'll draw howls of protest from those...

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Beware the one-eyed budget brigade

A great journalistic delusion is that politicians and others are always resorting to spin, so what journos do is remove the spin and tell it like it is. But too often they replace the speaker's spin with their own. Consider the treatment of the Grattan Institute's report on budget pressures facing Australian governments. One paper reported it as concluding that "federal and state budgets will be generating yearly combined deficits...

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Why a little inflation isn't such a bad thing

I was in a taxi on Wednesday when we heard on the radio that the consumer price index had risen by just 2.5 per cent over the year to March - smack in the middle of the Reserve Bank's target, leaving it room to cut interest rates further if need be. So, no probs there. "But why do we have any inflation?" the cab driver asked me. "When I came to Australia I could buy a rock cake for 8? - the other day they wanted $3.50." It...

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Budget surplus suddenly out of political fashion

Something highly significant has happened in just the past week: it's become clear the tide has turned in our politicians' demonisation of budget deficits and debt. What used to be anathema is so no longer. Predictably, it's happened not because the pollies have seen the light, but because they've been mugged by reality. In consequence, the Grattan Institute's John Daley may well be right in saying we face a "decade of deficits". That's...

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GITTINS’ GOSPEL: THE ECONOMICS OF JUST ABOUT EVERYTHING

I read that the Anglican Archbishop of Sydney, Dr Peter Jensen, very much disapproves of playing I Did It My Way at people’s funerals, describing it as ‘vulgar egotism’. This is a pity because, in my own vulgar and egotistical way, I like to think that, in the more than 30 years I’ve been the Herald’s economics editor, I’ve tried to do it my way, not the way other journalists would do it. The besetting sin of journalists is to...

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