Morrison’s deficit blow-out: doubled, trebled or quadrupled?
One of the major parties does indeed, in the words of Scott Morrison, have an "absolutely howling shocker" of a record on managing the deficit. But it ain't Labor, writes econometrics writer Alan Austin.
Treasurer Scott Morrison lambasted Labor’s legacy on Friday’s ABC radio AMprogram and curtailed any Coalition criticism. He used, effectively, a trick his side gets away with all too easily.
MICHAEL BRISSENDEN: Wouldn't Labor be perfectly entitled to argue they've been forced to accept some of your cuts because they've been left in a disastrous fiscal position with the disastrous legacy of your government. I mean just after three years ...
SCOTT MORRISON: No, I don't accept that at all, Michael.
BRISSENDEN: ... you've tripled the deficit in three years, you've increased net debt by $150 billion ...
MORRISON: Hang on, Michael, could you explain to me how you think we've tripled the deficit given that is a straight-out Labor line that is being run, you've just repeated it so maybe you can explain to me how that is substantiated.
Several journalists in Australia could readily explain how. Luckily for Morrison, Brissenden is not one of them. This gave the Treasurer free rein:
“Now if you're suggesting to me, Michael, that somehow Labor was a better manager of money when they were in government then you can make that suggestion but I don't think the Australian people would concur ... Labor is still saying they can run higher debt and higher deficits ... that is a recipe for fiscal chaos ... if you want to believe the same old Labor rhetoric again, well then go right ahead ... Labor's record on this is an absolutely howling shocker.”
And on it went. So, what is the reality? Has the Coalition trebled the deficits? There are several ways to check.
Compare the Coalition’s first budget forecasts with outcomes
In his 2014 budget speech then-treasurer Joe Hockey forecast these deficits for the next four years:
Total deficits:-$141.1 billion. (That is 2.3 times Hockey’s projections.)
If we take the latter three years only -- eliminating Labor’s legacy -- the factor is 3.4. All those numbers were generated by the Coalition.
Compare PEFO forecasts for 2013 and 2016
The PEFO is released before each federal election by the heads of Treasury and the Finance Department. Authored by non-partisan economists, it is regarded as free of political spin.
Before the 2013 election, the PEFO forecast these deficits:
2014-15: -$24.0 billion
2015-16: -$4.7 billion
2016-17: +$4.2 billion (surplus)
Total deficits: -$24.5 billion.
Compare that with the 2016 PEFO, released three weeks ago. Forecasts for the next three years:
2016-17: -$37.1 billion
2017-18: -$26.1 billion
2018-19: -$15.4 billion
Total deficits: -$78.6 billion. (That is 3.2 times the 2013 projections.)
Note: if we include the transition year -- 2013-14 -- the factor is 2.2. But that year was partly Labor’s program.
Compare the 2013 PEFO with actual outcomes
As shown above, the boffins in 2013 forecast total deficits of -$24.5 billion for the three years from 2014-15 to 2016-17. Compare that with the Coalition’s outcomes:
2014-15: -$37.9 billion
2015-16: -$40.0 billion
2016-17: -$37.1 billion (projected)
Total deficits:-$115.0 billion. (That is 4.7 times the projections.)
Note: if we include the transition year -- 2013-14 -- the factor is 3.0.
Compare the best deficit delivered by each regime since the global financial crisis (GFC)
Labor’s best actual deficit was -$18.8 billion in 2012-13. The lowest delivered by the Coalition was -$37.9 billion in 2014-15. That is just over twice Labor’s.
Labor may wish to observe here that 2012-13 was still impacted by the GFC, with eight OECD countries still in recession. In 2014-15, none were.
So the options for the factor by which Coalition deficits have blown out are 2.3 times, 3.4 times, 3.2 times, 2.2 times, 4.7 times, 3.0 times and 2.0 times. Pick one.
On debt, Finance Department data shows net debt is up since the last election by $111 billion, or 64%, to $285.8 billion. Gross debt at the end of May, according to the Office of Financial Management, was up by $160.6 billion, or 58%, to $438.0 billion. Despite the global recovery.
So, whose record is an “absolute howling shocker”?