Recipients of my recent Commentaries will be well aware of my expressions of concern about the budget outlook in the last couple of weeks. Friday’s Commentary expressed additional concerns after the publication by the heads of Treasury and Finance in PEFO of their concerns, albeit expressed diplomatically (at the same time it was reported that Treasury head Fraser would resign after the election: he will be a serious loss and his successor under either party will find him difficult to follow). I also drew attention to the Spectator Article by John Stone, which not only savaged the Coalition’s budget but pointed out that neither Labor nor “independent” journalist commentators have (with one or two exceptions) drawn attention to the seriousness of the economic problem Australia now faces. I concluded by suggesting that the Coalition should acknowledge the problem and indicate that after the election it will start a program of reducing spending by at least 2% of GDP over the next three years.
I now draw attention to an article by Judith Sloan in Weekend Australian (see below) which paints an even gloomier picture.
- The idea promulgated by Turnbull that he has a policy of living within our means is not reflected in the four year Budget forecasts/projections, which in any event depend on achieving “rosy” forecasts.
- Over that period gross debt will increase by 17% and is expected to increase further after that. “There is absolutely no way Australian will retain its credit rating between now and then”.
- The Coalition has proved to be as fiscally hopeless as Labor, although Labor’s spending plans indicate that if elected its budgetary position will be worse than the Coalition’s. If account is also taken of Labor’s assumed but “simply make-believe additional revenue” from multinational companies and the “zombie savings stuck in the Senate”, the budget deficits would be at least $30 bn higher under Labor in the four year period than the $84.5 bn being foreshadowed by the Coalition.
- Labor also plans to spend large additional sums after the next four years mainly on schools and health.
- “Labor is completely out of control fiscally; the Coalition is slightly better but no cigar”. But both sides are in a fiscal hole.
As mentioned above, the Coalition must asap acknowledge the budgetary problem and promise its remediation after the election. But while critical of Labor’s spending, Turnbull does not do that and his inclination is to support government spending. But if the rest of the electioneering is mainly about differences in spending, Labor is likely to win because it will firstly find “holes” that need (sic) to be filled and secondly most of the media will help it find the holes. The ABC is already in particularly good form (sic) in identifying “problems” and getting people to put forward their solution, which is of course that “the government needs to find some money to deal with this”! The ABC is showing no sign of seriously discussing with outside experts who are prepared to say what they really think about the budgetary outlook and its economic and financial implications.
I am not aware of any attempt by individual Coalition members to confront Turnbull on his failure to address the budget problem. They should seriously consider that in their own interests.