2012-13: predicted $1.5 billion surplus, outcome to be known in September 2013.
As you can see, a $21.4 billion deterioration from budget forecast to outcome in 2011-12 will be the second biggest fiscal blowout in history after 2008-09, when there was a massive $48.8 billion swing courtesy of the GFC.
All up, Swan’s five budget outcomes before 2012-13 are now expected to total a combined deficit of $154 billion, including the $19.7 billion surplus in 2007-08 when he was only Treasurer for the final eight months.
While there have been a range of bring-forwards and delays to window-dress the 2012-13 forecast and blow out the 2011-12 deficit, the government is also continuing its questionable practice of failing to fund the increases in unfunded public sector superannuation.
For instance, last year’s budget estimated that unfunded super would be $129.5 billion in June 2011, rising to $147.8 billion by June 2015. Fast forward 12 months and the estimate for June 2012 has rocketed to $138.5 billion and the figure four years hence, in June 2016, is up to $160 billion.
Back in Swan’s first budget in 2008, he forecast unfunded super would hit $123.6 billion by June 2012. Despite a $15 billion blowout in the estimated liability by Treasury, the government has stopped contributing to the Future Fund, which is meant to cover these claims largely related to Defence pensions.
By way of contrast, Victorian councils have maintained fully funded defined benefit pension schemes over the years and were required to write a cheque for $72 million last year when the scheme briefly slipped back to 93% funding.
While Crikeyregularly condemned Peter Costello for claiming surpluses courtesy of ignoring a $29 billion blowout in unfunded super over his first eight budgets, at least he finally got with the program and established the Future Fund in 2006.
Alas, the net assets of the Future Fund have only risen by $2.4 billion to $77 billion over the past 12 months and Wayne Swan has now presided over a blowout in the Commonwealth’s unfunded superannuation of more than $30 billion.
It is worth reflecting back on the days in 2008 when The Australian was editorialising about “Peter Costello’s success in eliminating commonwealth debt and fully funding the superannuation entitlements of federal public servants through the Future Fund”.
This was bollocks at the time and remains a mirage. After five years of Swan as Treasurer, the Commonwealth’s negative net value has blown out to a projected -$248.6 billion by June 2013.
Intuitively, it doesn’t make sense for the federal government to predict surpluses into the future, while requesting an increase in the debt ceiling from $250 billion to $300 billion.
The home page of our central debt management agency, the Australian Office of Financial Management, shows that the Feds currently have $228.3 billion of bonds outstanding. There will be an auction for $700 million of 10-year bonds on Friday, but it hard to see why the debt limit needs to go above $250 billion.
Sure, there will be a cash splurge before June 30, but that is only expected to lift outstanding bonds to $235 billion.
One interesting factor is the NBN, which has so far been funded by running down the Building Australia Fund managed by the Future Fund. Alas, the BAF has dwindling reserves so the $5.9 billion equity contribution to NBN Co from the Commonwealth in 2012-13 will be funded by the AOFM issuing “Aussie Infrastructure Bonds”.
It is hard to fathom why the Auditor-General has allowed this to be kept off the budget books. Real money is being spent creating a government-owned asset. When money is spent building submarines it goes through the budget, so why is the construction of a fibre network any different?
If the argument is run that the budget forecast relates to recurrent expenditure only, then why is the estimated $4 billion in proceeds from spectrum sales in 2012-13 included in the budget?
All up, Swan has produced unprecedented twists, rorts, fiddles and heroic assumptions to get to his forecast $1.5 billion surplus.
The outcome will end up being a deficit of more than $20 billion but by the time that is formally declared in September next year, Clive Palmer is likely to be the Member for Lilley and Swan will be enjoying his unfunded indexed pension for life.