A surplus of black holes

Shenanigans over costings are even boring Penny Wong, or was it a sense of resignation that caused her to say enough is enough? Whatever influenced Ms Wong, enough is enough. All of the fuss, recall, is coming from chaotic Kevin Rudd who provided his costings ‘five minutes before midnight’ on election eve in 2007; and from a government that has an unequalled record in creating real black holes.

These are not imagined, or prospective, or possible, black holes. These are actual and persistent black holes. For each of the past six years, under the most dreadful government imaginable, the budget has been in deficit; and, for the most part with a deficit markedly more than forecast at budget time.

Let’s excuse 2008-09, when a forecast surplus of $25 billion turned into a deficit of $27 billion. The GFC would have affected the budget outcome even without Rudd’s profligate cash handouts, pink batts and school halls. Only in 2009-10 did the budget deficit (measured as the underlying cash balance) come in below forecast (slightly); and as that deficit was a whopping $54 billion, it was nothing to write home about.

 In 2010-11, the deficit was $47 billion compared with the forecast $41 billion. Close, you might say, in a world where billions don’t seem to matter that much anymore. In 2011-12, a forecast $23 billion deficit turned into $43 billion. In 2012-13, a forecast small surplus turned into a $19 billion deficit. And to cap it all, the forecast in May for this year’s budget deficit of $18 billion has already turned into $30 billion (and probably still counting).

And all of this is aside from the Government’s forward estimates at budget times, which have consistently underestimated future deficits or, of course, as we know, optimistically and notoriously forecast non-existent, forever disappearing, future surpluses.

The abysmal budget record of the current government puts in stark perspective Rudd’s accusation that the Coalition’s so-called savings are $10 billion shy. Even if true, and who would ever know, what is $10 billion these days? Treasury has shown that it can’t get close to this degree of tolerance with its forecasts; and the current government can lose that much, and more, in the space of three months. Under this government $10 billion has become pocket change.

What exactly do you do with this kind of historic budget baggage around your neck? You’d slink away, I suppose, if you were a normal functioning human being. Not a bit of it, if you’re a political junkie and with the skin of an elephant to boot. After all, if you can come up smiling (and smiling and smiling) when you’ve been called a dysfunctional psychopath by your own side, and half your senior colleagues have jumped ship on your return, what is hard about keeping a straight face while accusing your political opponents of hiding a $10 billion black hole? Nothing is the answer. It might be getting too hard for Penny; not for K. Rudd.

What is too hard for the press to grasp and for many economists is that getting the budget under control has nothing to do with costings. ‘Abbott wants us to take him on trust’, the accusation is hurled. ‘We want to see the numbers.’ The numbers mean diddly squat. Surely the evidence of the past six years shows that in spades.

A quite different perspective should be applied. First it is hard to imagine anything worse from the Coalition than we’ve had under Labor. Second, the Coalition produced surplus after surplus when last in office; and records should count for something in the absence of other relevant information of which there is none. Third, apart from ‘stopping the boats’, the whole thrust of the Coalition’s campaign has been built around economic management. Failure in that area is not an option, if the objective is to last for more than one term. Finally, and critically, character not costings is the key to living within one’s means; whether applied to individuals, to businesses, or to governments.

It is not a question of trusting Abbott in a vacuum. It is a question of who you trust. A ramshackle government with an abysmal record led by someone who is own party despises — or a united opposition, many of whose members were ministers in a successful government, led by someone who has won and earned their loyalty.

If you choose character over mindless, capricious, and unfathomable arithmetic, you choose Abbott and the Coalition. Why is it still so close? That is the only puzzling question.

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics