May 22, 2013

The mystery of Treasury’s disappearing revenue: Parkinson explains

The Treasury Secretary's discussion of what has gone wrong with revenue forecasting in recent years provides a context for the coming challenges on fiscal policy. Bernard Keane and Glenn Dyer report.

The funniest aspect of the Coalition’s renewed claim that Treasury’s independence has been compromised — a claim that has been trundled out ever since Labor came to power by both opposition and their media apologists — is if you take the claim seriously, Labor must be pretty rubbish at politicising the public service.

After all, for the years leading up to the financial crisis, Treasury regularly underestimated tax revenue, making John Howard and Peter Costello look like stellar fiscal managers and setting the scene for them to turn the federal government into a giant cash machine blasting money at voters. As soon as Labor got into office, however, that came to an end. There was no more underestimating revenue. Indeed, Treasury promptly began overestimating it, and not by a few billion here or there, but by double-figure billions, leaving Treasurer Wayne Swan to explain why deficits were persisting when he’d promised surpluses, and up until December, repeatedly slashing spending to try to post a surplus.

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22 thoughts on “The mystery of Treasury’s disappearing revenue: Parkinson explains

  1. Jimmy

    Hang on this aritcle seesm to make out that Hockey has been inconsistent and has been making things up about the economy – that can’t be true because the media would flay anyone who does that!

    Oh wait he is a liberal.

  2. Mike Flanagan

    No, There are three solutions Bernard and Glen.
    The third solution is the imperative to keep economic illiterates and numerical dunces like Hockey, Robb and Abbott from the budget and finance departments that this nation, and all of us, depend on.

  3. Scott

    “Treasury does not serve up a range of budget forecasts for the Treasurer.”

    No, but I’m sure they produce a detailed sensitivity analysis based on movements of key economic indicators and assumptions, like every other forecaster worth their salt. These can be used to create optimistic and pessimistic scenerios and hence budget forecasts.

    Costello used to say he always allowed for some downside bias to combat the institutional optimistic bias of Treasury. He knew they were fallible. If Wayne Swan was a confident Treasurer with some real business experience, he might have done the same. Joe Hockey, take note!

    Sadly, this Government have mythologised Treasury (probably due to the influence of Saint Ken Henry, who saved their bacon during the GFC) and this is the end result.

  4. klewso

    Mike they had Cousin Jethro in there too (as “Fine Ants Minister”?) before Robb.

    In that “interview” on Lateline the night of the budget – I was almost surprised Robb wasn’t challenged and pursued by such a “learned journalist” as Alberici when he made that claim of his, about “that range of figures” he knows all about :-
    [“Yes, but also I know how it works. The Treasury provides a range of forecasts. I mean what we’ve just heard from Penny Wong that they’ve taken a hit to revenue, it’s a myth. It is an absolute myth….” That would have drawn some like a rat up a drain-pipe – and I reckon she would have been right in there to, if it was “Labor” that said it, rather than the insipid rejoinder she threw in.]

  5. Gavin Moodie

    The Coalition’s attack on the professionalism of Treasury officials is unwarranted and will make it harder to recruit and retain disinterested civil servants.

  6. Jimmy

    Gavin – It’s just the standard conservaitve attitude – climate change scientists don’t know anything, the Navy is wrong about the risks of turning back the boats, the GFC didn’t happen and the treasury doesn’t know what it talking about – no matter how credible the evidence against their policy they deride it, get take the friendly press front page headline and ignore the correction on page 23 in the knowledge the majority of the public will too.

  7. Gavin Moodie

    Thanx Jimmy; you do seem to have spotted a pattern.

  8. Jimmy

    It’s not hard to see, people just don’t want to look.

  9. Gavin Moodie

    Not that Costello had ‘real business experience’ before he became Treasurer. He was a junior lawyer before he entering politics.

  10. klewso

    Remember Bishop the Elder making a name for herself tearing strips off Hawke/Keating public servants in public – then defending “hers” in Howard’s government (kero baths etc)?
    The more things change …..?
    Hockey and Robb will protect their “workers” in their time.
    ‘Til then they’ll use them as whipping boys and girls, to pillory and score political points.

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