The first budget black hole was a mere $540 million. That was in 1987 dollars, which is around $1.5 billion these days. It was in John Howard’s tax policy, assembled by his shadow treasurer Jim Carlton and launched during the 1987 election. Paul Keating seized on it and tore Howard apart, because it really was a black hole — Howard admitted it was an error by Carlton. His campaign never recovered.
Ever since, governments in election campaigns have been trying to replicate Keating’s 1987 attack, and failing. Keating himself tried it again the following election and failed — though it didn’t stop him trying every election after that. It has become yet another pointless ritual of politics, like governments issuing demands about what opposition leaders “must do” the afternoon before a budget reply speech. The closest any government got was the Howard government after the 1996 election, when it confected the claim of an $8 billion “Beazley black hole” about the budget Labor had left the Coalition. It’s true that the Keating government’s budget forecasts were decidedly optimistic — but both sides were aware of that and it suited both Howard and Keating in the lead-up to the election to ignore the fiscal reality.
That “Beazley black hole” had been put together by the Department of Finance at the new government’s request, and as a bureaucrat at the time I got to see a lot of the stuff Finance had put on the list; some of it was an outright lie, including large-scale spending that Labor had considered but rejected while in government. To this day, there are senior DOFA and ex-DOFA bureaucrats walking around Canberra who should be deeply ashamed of their role in that scam.
The Howard government also tilted the rules further in favour of governments with the Charter of Budget Honesty, under which oppositions could — were they so minded to — submit their policies for costing to Treasury and Finance in the lead-up to an election. In fact, this merely exposed oppositions to more criticism — a fact implicitly acknowledged by the Coalition when it declined to bother with the very system it had created when it was in opposition. Instead, we had the absurdity of Joe Hockey using an accounting firm — later fined — to “audit” his numbers, and Treasury and Finance ripping them apart after the 2010 election, which didn’t help Tony Abbott’s campaign to secure crossbench support.
And each election, the claims about the size of the black holes have steadily grown, first into the billions, then into the tens of billions, generally to the yawning indifference of voters. But while governments have failed to recreate Keating’s 1987 demolition, and oppositions have occasionally tripped up, yesterday Scott Morrison and Mathias Cormann achieved the unusual feat of performing the ritualistic unveiling of the budget black hole so badly they damaged their own credibility in the process.
The chief problem was that they’d done exactly what Finance did back in 1996 — shoehorn in something that could be vaguely linked to Labor but wasn’t actually a commitment. Thus, a relatively modest Labor commitment on foreign aid turned into a $20 billion whopper that proceeded to thrash about in the Morrison-Cormann media conference and smash it to pieces, especially given the Coalition has exactly the same nebulous commitment to increased aid funding as Labor. Along with other extrapolations, double-counting and general half-arsery, over the course of a short period of time in that media conference, the black hole went from a claim of $67 billion — a new record for black holes — down to a claim of $32 billion, and Morrison was reduced to saying not so much that there was a black hole but that Labor needed to clarify its spending commitments.
Fairfax’s James Massola summed up a quarter of a century of politicians trying to out-black hole their opponents in front of increasingly incredulous journalists when he asked “is there a black hole in your black hole?”. Of course, a black hole inside a black hole would actually make the original black hole even worse, but you get the point. It left what was intended to be a day devoted to attacking Bill Shorten’s fiscal credibility as a smoking ruin for the government.
And yet there’s a grim reality beneath all this: under this government, spending has ballooned from 24.1% of GDP in Labor’s last year to 25.8% of GDP this coming financial year. Net debt will grow from 10% of GDP in 2012-13 to 18.9% in 2016-17. Even Scott Morrison admits he has a spending problem. But neither side is talking seriously about significantly altering our current fiscal trajectory. Like 1996, for all the talk of black holes, it suits both sides to ignore the budget reality.