Malcolm Turnbull’s ‘Four Point Plan To Pay Off Labor’s Debt’ was a tired, dismal effort that will sink without trace — has already done so in fact — because there’s hardly anything in it, and no one cares anyway because they’re focused on whether he’ll survive to the weekend.
But worse than that, Malcolm Turnbull is leading his party into a trap.
That’s because there is now a chance that next year’s budget will show a surplus in the final year of its “forward estimates”.
After yesterday’s decline in the unemployment rate, I understand government ministers and Treasury are daring to hope that the date for a return to surplus that was put into in this year’s budget — 2015-16 — might be brought forward by two years, to 2013-14.
Each budget contains four years: the forthcoming year, plus three subsequent years shown as forward estimates. Next year’s budget will therefore include numbers for 2013-14.
So there is a chance that next year’s budget in May will show a surplus in its final year.
If the opposition persists with the “Paying Off Labor’s Debt” campaign strategy, it will presumably have to promise to bring forward the first surplus year to 2012-13.
It will not be able to do this with vague references to reducing waste and increasing growth — as it did with the first three points of yesterday’s dreadful four-point plan.
The Charter of Budget Honesty and the pre-election fiscal outlook from Treasury will ensure that any forecast reduction in the deficit will have to be clearly funded with spending cuts and tax increases.
Some money can be put in for general waste reduction and extra growth, but not much. And the government can sharpen the trap by ensuring that the 2012-13 deficit in next year’s forward estimates is quite large, so that bringing forward the surplus year from 2013-14 would be very expensive.
Meanwhile, by the time the election is called next year, all of the fiscal stimulus will have been spent or committed. Malcolm Turnbull (or whoever) can complain all he likes about “reckless spending”; it will be too late to campaign on not spending it. There will have to be new spending cuts and taxes.
The experts do not usually regard this as a good way to get elected. In fact if a relatively unpopular Liberal leader goes into next year’s election campaign promising cuts in spending programs and/or tax increases it will be an absolute wipeout. The Coalition would take another three terms to get back.
And it will be even more of a wipeout if the election comes after a May budget that shows a return to surplus.
The only way out of this nightmare is to dump Turnbull and then quietly strangle the “Paying Off Labor’s Debt” strategy and replace it with … err … Something Else.
There was one worthwhile point among Malcolm Turnbull’s four points yesterday: the establishment of a Parliamentary Budget Office, modelled on the US Congressional Budget Office.
The CBO provides Congress with independent analysis of the government budget, both the forecasts and the performance against them. Australian Treasury tries to pretend that it’s independent sometimes but it’s not, a fact that will be evident this morning when Treasury Secretary Ken Henry appears before the Senate inquiry into the fiscal stimulus.
Having a CBO/PBO in Australia would be a huge advance, in my view, although it’s not something a government would propose until they’re back in opposition — the Parliament itself would have to set it up.
The Parliamentary Library, which is part of the Department of Parliamentary Services, produces a Budget Review each year, but this is really just a summary of the budget for MPs who can’t be bothered reading the original.
The latest publications on the US CBO’s website include: “monthly budget review”, “withdrawal of US forces from Iraq: possible timelines and costs”, “the effects of two specified policy options for health care on the federal budget deficits”, “the economic effects of legislation to reduce greenhouse gases”. It keeps a constantly updated long-term budget outlook and analyses all of the President’s budgetary proposals.
In 2008 the CBO issued 39 studies and reports, three briefs, 12 Monthly Budget Reviews, 29 letters, 22 presentations, and two background papers — along with seven other publications and numerous supplemental data. It does this on $US44.1 million a year, which seems pretty good value.
It’s just a pity that the PBO idea is the fourth point of a four-point plan that has already bitten the dust — and deserved to die what’s more.
The first three headlines, just so you know why the plan is a tired dud, are:
- Reduce government waste.
- Increase economic growth,
- Restore the balance (cut government spending as a percentage of GDP, presumably by “reducing government waste” and “increasing economic growth”).