Monday, August 12, 2013

These numbers are a slap in the face for the Coalition - Sydney Morning Herald

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Treasury concedes fallibility

For the first time, Treasury has used the release of the Pre-election Economic and Fiscal Outlook - PEFO - to indicate how unreliable its predictions might be.

You have to salute the courage of Treasury secretary Martin Parkinson and Finance Department secretary David Tune. Under serious pressure from their next political masters to produce a set of numbers favourable to the Coalition, they have stood their ground.

The bottom line of their Pre-election Economic and Fiscal Outlook (PEFO) is effectively identical to the one published 11 days ago in the government's economic statement. Where it differs, the forecast budget outcomes over the next four years is actually $209 million better than the previous estimate.

ELECTION 2013: Opposition Leader Tony Abbott speaks to media on the bus on the way to Ekka

Tony Abbott tells us the budget numbers are deteriorating by $3 billion a week. Well, not any more, they're not. Photo: Alex Ellinghausen

Moreover, their medium-term projections confirm that, in the eyes of the experts who run it, the budget is not out of control. Assuming normal growth over the medium-term, they see the budget returning to surplus in 2016-17, reaching a substantial surplus of roughly 1 per cent of GDP (gross domestic product) by 2019-20, and then staying there.


Those surpluses will matter, hugely, because that is how we will repay the debt, which PEFO expects to hit $370 billion before the surpluses start flowing.

On these estimates, Australia's fiscal position is not good, but it is manageable, and it is heading in the right direction.

Shadow Treasurer Joe Hockey at Parliament House on Tuesday.

Shadow Treasurer Joe Hockey at Parliament House on Tuesday. Photo: Alex Ellinghausen

Of course, these are just forecasts, and like all forecasts, they can be wrong. What matters is that, despite pressure from the Coalition to change their forecasts to make the government look bad, Parkinson, Tune and their senior officials have put their integrity ahead of their job prospects.

It is good for Australia that we are run by officials like that. If the Coalition does not succumb to hubris, it will realise it will also be good for a Coalition government to have senior officials who will tell it the truth, and not what it wants to hear.

This PEFO contains no smoking gun. Quite the opposite: our two economic officials have confirmed that the numbers the government has published were the numbers prepared by the experts at Treasury and the Department of Finance.

That should be no surprise to anyone. The budget forecasts are always prepared by the officials, not the Treasurer or his staff. Sometimes the officials come under covert pressure from the Treasurer of the day to massage the figures, but, to my knowledge, they have always stood their ground. And so they must, because it is their independence from political pressure that makes their expertise valuable.

These numbers are a slap in the face for the Coalition – but it scored an own goal by pretending that the Labor government had drawn up the budget numbers, not the officials.

That line was always phoney, the Coalition knew it, and it is now exposed as such. The budget numbers are the officials' numbers. It's always that way.

Tony Abbott tells us the budget numbers are deteriorating by $3 billion a week. Well, not any more, they're not. In the last week and a half they have improved by $209 million – and mainly because Treasury now expects the emissions trading scheme and the mining tax to raise an extra $680 million between them over the next four years.

That's just a forecast, as the previous one was, but it increases the already large budget hole the Coalition will have to fill in order to pay for its promises, which are growing with each week.

The main significance of today's PEFO is that it upholds the integrity of our two key departments, and removes the excuse the Coalition has given us for not telling us how it will pay for its promises.

Time's up, fellas. The election is now just 25 days away. Barring surprises, Labor's plans are all out there, and costed by the officials. It's the Coalition's turn now to level with us: how will it pay for its promises? That is the issue now.
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