There’s a most useful table in the all-important Budget Paper No.1, drily entitled “Reconciliation of Australian Government general government revenue estimates from the 2008-09 Budget.”
That’s your Budget tale of woe right there. In twelve months, we’ve gone so far backwards in Government revenue, in 2011, the Government will barely manage to get what it expected to get last year.
That’s based on Treasury’s relatively mild forecasts — only 0.5% contraction in 2009-10, 2.25% in 2010-11 and then 4.5% growth beyond that. That’s based on the world economy bouncing back to more than 2% growth in 2010-11 and 3.5% in 2011-12.
As plenty of people have pointed out, that’s fairly optimistic. Still, no one’s track record of forecasting in the last twelve months is much better than Treasury’s — or much worse.
But the numbers in that table tell the tale of just how exposed government revenue is to the global economy and its impact on Australia. Even missing Treasury’s forecasts by a little will mean Wayne Swan’s “path back to surplus” will, to labour the metaphor, be a whole lot longer and go via the pawnshop.
Using Treasury’s figures as the basis for a very rough calculation, an additional contraction of 0.5% growth in 2009-10 will take another $8b out of the budget. Growth of only 2% in 2010-11 will cost perhaps $14b. Tepid growth of 1% would cost $40-50b on what is currently forecast. They’re the sort of numbers that will blow a hole in any budget strategy quick smart.
Reducing the deficit depends on some other heroic assumptions, as well, such as the unprecedented feat of holding spending to 2% growth once the recovery arrives, not to mention getting major savings initiatives through the Senate. But at least such factors are either within the Government’s control or can be influenced by it.
Revenue is beyond even Kevin Rudd’s remarkable powers of information management.
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