I ran my own small business most of my working life. In doing so I annually produced a budget. It was only ever a guide because I knew that there were a number of factors that could throw my assumptions completely out. They were assumptions that often were out of my control. For example, my sales revenues could be badly affected during the course of the year, or if I lost a customer or a large order.
Now comparing my annual million-dollar turnover with that of the Australian trillion-dollar budget might sound rather simplistic but the principle is still the same. The outcomes of both rely on assumptions. Sometimes you get it right and sometimes you don’t. They rely on best guess assumptions on best available information.
Now last Friday week, as is required by the Charter of Budget Honesty when an election is called, the Secretary of the Treasury, John Fraser, and the Secretary of the Finance Department, Jane Halton, were required by law to publish a true and honest assessment of Australia’s national finances within 10 days. It is a totality unbiased, apolitical appraisal of the current financial position and the state of the books. It is known as the Pre-Election Fiscal and Economic Outlook. It was introduced by Peter Costello and if we didn’t have it, well frankly politicians could tell you whatever they liked and it could go unchallenged.
So when the two secretaries issued their statements they said that the figures were all upfront. The size of the deficit published in the federal budget only a couple of weeks before, was accurate.
All looks good, doesn’t it? But here comes the crunch. They seriously challenged the “assumptions” on which the numbers are founded.
They used the quaint word “benign” to describe the assumptions.
Fraser and Halton warned that all the official assumptions, “Should Australia experience a significant negative economic shock, the fiscal position would be expected to deteriorate rapidly”.
Meaning it wouldn’t take much to put us up shit creek. Their main concern was that the government’s projections rest on an unrealistic assumption about productivity growth. Repeat, “unrealistic assumptions”.
They Government assumes that productivity growth will remain the same as it has for the past 30 years which of course is an absolute nonsense. The secretaries said this would need “continued economic reform”, and the Government seemed to have squibbed any of that.
That we are being sold a hoax in the guise of a plan seems to escape us. As one journalist at the Economic Debate rather sarcastically pointed out on Friday. The budget assumes iron ore at $50 dollars a ton whereas it now $40 and will probably go lower. This means that the budget is not worth the paper it is written on. A ten-dollar difference can throw the budget out by many millions.
It also means that if indeed the budget is a plan then the plan assumes a number of unrealistic economic hypothesis that make it a bad plan.
There is no certainty that the centrepoint of the plan, tax reduction for big business could come to fruition. If PEFO is correct then it is at best, a bet each way that the money will be there. The same goes for the opposition’s education policy which relies on that revenue.
It’s all just a big con. They are implying that they will make all the reforms necessary and in doing so there will be a phenomenal increase in our productivity. Jobs growth and revenue will suddenly appear and the deficit will be quickly wiped out. Really, the budget was just a pile of improbable suppositions.
As the outgoing governor of the Reserve Bank, Glenn Stevens, said this week:
“The budgetary situation will be OK if nothing else goes wrong.” And made the commonsense observation: “You can’t really assume in life that nothing will go wrong over an extended period.”
It of course raises the question, “What would Messrs Fraser and Halton be doing about the state of the economy unencumbered by partisan politics?”
It’s high time both parties treated us with respect. When political parties are evasive and deliberately withhold information vital to the voter making a decision on how he/she might vote, then their democratic rights are corrupted, as indeed is the democracy parties assume to represent.
With five weeks to go both Turnbull and Shorten need to give us detail. In Turnbull’s case it is an explanation of if in the future the money isn’t available to give the top end of town the tax breaks for big business what then is plan b. Shorten faces the same question only the reference is education.
And I might add. Please cut the bullshit.
My thought for the day:
“Do you shape the truth for the sake of good impression? On the other hand, do you tell the truth even if it may tear down the view people may have of you? Alternatively, do you simply use the contrivance of omission and create another lie .I can only conclude that there is always pain in truth but there is no harm in it.”
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