The Gillard government will achieve its election promise of a budget surplus by 2012-13, even if the wafer-thin $1.5 billion surplus is achieved for mainly political rather than economic reasons.
Treasurer Wayne Swan unveiled his Mid-Year Economic and Fiscal Outlook (MYEFO) yesterday which shows how a net $7 billion in spending cuts — and shifting spending — will fund the surplus. The changes include cuts to living-away-from-home allowances, adjustments to the dependent spouse tax offset and small cuts to the public service and the baby bonus.
As Bernard Keane reported in Crikey yesterday:
“The government’s Mid-Year Economic Forecast reveals a big blowout in the deficit for the current financial year of $15 billion, reflecting a revenue fall of $4.8 billion and additional spending in response to the Queensland floods, as well as the bringing-forward of expenditure from 2012-13 in order to secure what will be the tiniest of surpluses, $1.5 billion. This year’s deficit is now expected to be over $37 billion.”
“We have taken the middle path between those who say we don’t need a surplus, and those who say we should take a really big axe to spending,” announced Swan.
In The Daily Telegraph, Gemma Jones and Henry Budd argued that the MYFEO cuts would hurt families: “As Treasurer Wayne Swan took a razor to parents, schools, teachers and university students, he insisted the $3 billion cost of the carbon tax was essential spending.”
Andrew Probyn, Shane Wright and Andrew Tillett at The West Australian reported the news in a similar way: “Stay at home mums, university students and public servants will wear the cost of the Gillard Government’s imperative to get the Federal Budget back in the black.”
But Swan chose to protect confidence over growth. It was the right choice in light of events in Europe, declares Peter Hartcher in The Sydney Morning Herald:
“In this world, confidence is king. By pledging to hold the line on the budget surplus, Julia Gillard, Wayne Swan and Penny Wong were protecting Australia’s fiscal credibility. They were rewarded immediately.”
Achieving a surplus has very little to do with economic management (although that’s going well too) and more to do with political point scoring, notes Michelle Grattan at The Age:
“But for political reasons, there is no doubt that Labor wanted to show that it could keep this promise, difficult as it became in the circumstances of collapsing revenue and token as it might be seen by some.”
The Australian‘s Dennis Shanahan says by clinging to a promised surplus, Labor has lost its chance to be open with the voting public:
“Rather than taking the people fully into its confidence and admitting changing circumstances may prevent a surplus — indeed may dictate keeping a responsible deficit — the Gillard government has contorted and distorted its spending and savings pattern lover a period of years to cling to a budget surplus forecast so small it is risible.”
This tiny surplus is not even in fashion any more, writes Tony Wright in The Age (extra points to Wright for making a surplus both sexy and funny):
“This, in fiscal terms, is less an itsy bitsy teeny weeny yellow polka-dot bikini than one of those carefully placed pieces of string known on Copacabana beach and the French Riviera as a thong.
“And just as the thong — an item of apparel too tiny to actually accommodate a single polka dot — has an alarming habit of disappearing with the merest shimmy of a bottom, Mr Swan’s surplus looks likely to become hardly more than the fevered anticipation of an overworked imagination.”
Such a small surplus is just tokenistic and only happened because Swan massaged the numbers, argues Judith Sloan in The Australian:
“If the Gillard government had been really intent on delivering sustained budget surpluses in the coming years, it would have looked much harder to reduce spending and find savings.”
Amongst all this economic talk of late, we’ve been missing the voice of the farmers. There’s a good reason for that, says Ross Gittins in The SMH:
“We’ve heard nothing from the farmers because they’ve been doing quite well for themselves. And we never hear from farmers when times are good. City slickers never get invited to the harvest festival for fear of undermining the media’s stereotype that ”the man on the land” is ALWAYS doing it tough. In any case, who’s interested in GOOD news about the economy?”