When Josh Frydenberg gave his budget speech a few weeks ago, he grandiosely proclaimed “This is what we deliver tonight. The largest and fastest improvement to the budget bottom line in over 70 years.”
Now to most people, an improvement in their budget bottom line would mean they had more money, or at least owed less.
But that’s not the way this treasurer works.
He went on.
“By the end of the forward estimates, the budget is $100 billion better off compared to last year.”
Wow. That’s some achievement. If it actually meant anything.
So let’s have a closer look at that claim.
Firstly, you’ll notice that Josh says “by the end of the forward estimates” and “compared to last year”. That means his guess last year as to how much the budget deficits would add up to in the coming four years was out by $100 billion. That’s a pretty big mistake to make.
It also shows that the Treasurer has no idea what will happen next year, let alone in 4 years’ time.
In the first budget of the Morrison government for 2019-20, Frydenberg told us that, over the forward estimates, we would have surpluses totalling $45 billion. A year later, he was projecting deficits totalling $480.5 billion. That’s a negative turnaround of over half a trillion dollars in the space of a year.
The next year, the cumulative deficit total was estimated to be $342.4 b and now he is saying it will be $224.7 b and claiming the credit for the improvement when he hasn’t been close to being right once in his four attempts so far.
It’s fair enough to use the pandemic as an excuse for the change in fortunes but any suggestion of an improvement in the budget bottom line is ridiculous – it’s based on compounding bad guesses about the future, none of which have come to fruition, and ignores the fact that we have deficit budgets for the foreseeable future.
Josh’s other trick is ‘lowballing’ where numbers are manipulated to present favourable outcomes as explained in this article by Satyajit Das.
“Budget forecasts have repeatedly underestimated revenues, overestimated outgoings and understated commodity prices to make the actual outcome better and demonstrate competence.”
Some might call that being conservative but when Frydenberg then claims credit, it’s just dishonest.
To demonstrate just how “conservative” Josh is being in this budget, you only need look at commodity prices. The price of iron ore was $US134 a tonne – the budget assumes a price of $US55 a tonne. Thermal and metallurgical coal prices were $US512 and $US302 a tonne – the budget assumes US$130 and $60 respectively.
Whilst the prices may well drop from these historic highs, Josh has been doing this in every budget. A similar assumption for iron ore in last year’s budget ensured an upside surprise in revenue this financial year and the next of more than $6.5 billion. Claiming credit for improvements resulting from nothing more than poor, or deliberately manipulated, assumptions is very lazy.
Frydenberg has the smile of a confident man – the heir apparent to the Liberal party leadership representing a safe seat that will always vote Liberal.
The only possible risk to the path Josh envisages for himself might come from taking the people of Kooyong for granted when many of them seem to be more concerned about actual action on climate change and weeding out corruption in politics than they are about rubbery figures that mean nothing real. As Bobby Kennedy famously said, GDP measures everything except that which makes life worthwhile.
Josh has a nice smile. Then again, so do most conmen.
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