Figures to test Wayne Swan's restraint on spending

Figures to test Wayne Swan's restraint on spending

• BY:DAVID UREN, ECONOMICS EDITOR 
• From:The Australian 
• February 15, 2013 12:00AM 
• 12 comments

Wayne Swan, during question time yesterday, is facing pressure to make changes to the mining tax. Picture: Gary RamageSource: The Australian

WAYNE Swan's proudest boast until last December was that his government had put in place "the fastest fiscal consolidation since at least the 1960s".

With the future of the government's return to surplus now in doubt, the best the Treasurer can offer is his comment to ABC Radio yesterday that the government will achieve "a very substantial fiscal consolidation".

So far, the contraction in the budget deficit from its record of $54.5 billion down to last year's $43.4bn has been a modest 1.2 per cent of GDP.

GRAPHIC: Comparing Treasurers

That pales against the budget turnarounds achieved by the Hawke and Howard governments. Swan can still claim the biggest and quickest budget blowout in the past 60 years, with the turnaround from the last surplus achieved by his predecessor Peter Costello to the 2009-10 deficit representing a downturn equivalent to 5.8 per cent of GDP in two years.

The government will today release monthly budget figures for November and December which will shed some light on whether the deficit outlook is getting worse, and whether the government is succeeding in maintaining its promised restraint on spending.

In the first four months, revenue was up by 9.1 per cent on the same period last year, while spending was up by 3.8 per cent.

Even on the most recent and now obsolete published budget numbers, Swan relied much more on revenue growth than on spending restraint than did the consolidations of his predecessors. Had Swan achieved the return to surplus this year, it would, indeed, have been the fastest improvement since the "horror budget" of the Menzies government, under treasurer Artie Fadden, in 1951.

From the peak 2009-10 deficit to surplus in three years would have been a consolidation equivalent to 4.3 per cent of GDP.

This would have compared with Mr Costello's budget turnaround of 4.1 per cent of GDP across four years following the Coalition's election in 1996. He took the budget from a $6bn deficit to a $13bn surplus.

The Hawke government, which gained power in 1983 as a two-year recession was abating, ran a big deficit of 3.3 per cent of GDP in its first year, but under treasurer Paul Keating devoted the next five years to returning the budget to surplus.

That was a turnaround of 4.8 per cent of GDP.

The consolidations achieved by Costello and Keating were striking for their spending restraint. During Keating's five tight budgets, spending fell as a share of GDP by 3.5 percentage points, while revenue rose by only 1.3 points.

Similarly, Costello's four tight budgets lowered spending as a share of GDP by 2.5 percentage points, while revenue rose by 1.6 percentage points.

In the now obsolete forward estimates, the current government had proposed returning to surplus with the help of a 1.8 percentage point rise in revenue and a 1.3 percentage point fall in spending.

If the government were to narrow the deficit to $20bn this year and $10bn next, as economists believe is possible, it would represent a budget consolidation across four years of 3.1 per cent of GDP.

The government's effort to achieve a surplus in 2012-13 was aided by the shifting of revenue into the current budget year and spending out of it. Now that this year will be a deficit, it makes the starting point for 2013-14 much worse and there is less scope for the shuffling of receipts and expenses around the turn of the financial year.

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COMMENTS ON THIS STORY

• Honesty Posted at 3:49 AM Today

  Swan - cant tax, can't save, can't budget. How in the world are we going to get to increasing productivity if he can't even add or subtract. The job Is beyond the poor chaps capabilities, he has had five years it is too damaging to leave Swan as Treasurer.

  Comment 1 of 12
• LoWahQ of Perth Posted at 5:31 AM Today

  Times up, finito, gone, busted, buggar, caught short, wanting, writing on the wall..... All these words come to my mind when I think of the world's "greatest(?)" treasurer! Yea, greatest flop and fool may be!

  Comment 2 of 12
• tabitha of melbourne Posted at 5:48 AM Today

  More like Fastest growing sovereign debt of all time. Gillard and Swan continue to deliver "No Value" Abbott was right they should resign in shame.

  Comment 3 of 12
• Harry of Norwood Posted at 5:54 AM Today

  We cannot wait until September

  Comment 4 of 12
• tabitha of melbourne Posted at 5:54 AM Today

  How many times would Swan have be sacked if he worked in Private enterprise?

  Comment 5 of 12
• LittlePrince Posted at 6:59 AM Today

  The world's "best" treasurer is an inept illusionist.

  Comment 6 of 12
• Useless treasurer of Bundaberg Posted at 7:10 AM Today

  No surplus for swan he just cannot do the maths

  Comment 7 of 12
• Paul of Coffs Posted at 7:29 AM Today

  Boasting is about all Wayne Swan can do.

  Comment 8 of 12
• bill banter of brisbane Posted at 7:42 AM Today

  Wayne Swan is the worst Treasurer in our nation's history by a long shot - and the biggest spinner of untruths. Lying with Statistics is Swan's theme song. Both Rudd and Gillard have showed shocking judgement in selecting this fool for fiscal management. Swan, as much as Thompson and Slipper will bring the the government down this election. Probably, Swan will not even retain his own seat in Parliament. So thank heaven, the country will be rid of Wayne Maxwell Swan in about 219 days from now.

  Comment 9 of 12
• donkeygod of Cardiff, NSW Posted at 9:14 AM Today

  No matter how you look at it, we're still struggling to keep the deficit to $20 billions this year, and $10 billions next year. That's enough money to pay off the whole cost of the NBN (assuming, of course, that the NBN's cost doesn't itself blow out: it's another Labor thought-bubble, after all). Unh, until just a few months back, weren't we promised a surplus in July? Okay, the MMRT yielded zero revenue, but my understanding is that Treasury had predicted maybe three, four billions max. Not $20 billions plus. So what gives? Did Labor really miscalculate the national accounts by that much? Or were they simply telling porkies from go to woe? Wouldn't this be a record? One doesn't expect Canberra to be spot-on, but has any previous government missed the mark by THIS much? Maybe if you went back to WWII ... Geez, with an election coming on, it's going to be hard to believe Wayne and Julia if they predict that the sun will come up on the morning of 14 September. Bad show, but not, unfortunately, the end of the story. Now we've got to figure out how to pay back what we've borrowed!

  Comment 10 of 12
• Terry Kidd of Perth Posted at 9:59 AM Today

  Whatever .... Swan is very loose with the truth. What he can claim is the largest spendathon in Australian history, from an $80 Billion credit balance in the savings account to a $250 Billion deficit in the same account. Not bad in 6 years huh? Swan can announce that to the media and Parliament and be entirely truthful for once in his life.

  Comment 11 of 12
• plumber perth Posted at 10:33 AM Today

  ducks and drakes stop giving money away that you don't have that's economics 101 swanee

  Comment 12 of 12