The budget papers are quite clear. The effect of ALP policy on the budget has been to increase revenue by $2.4b and increase spending by $1.3b. These are the government’s own statistics, so I don’t know why they are being ignored.

There were other parameter variations which helped the budget… but these can’t be attributed to government decisions.

The redeeming feature of this budget is that they increased tax/spending by less than the Liberals generally did. But given the first budget is generally the time to slash… it is a shame they were so timid.

The bigger issue being ignored here is the low quality of economic commentary in Australia. Economic journalists (sic) seem to simply repeat government (or opposition) spin without understanding what’s going on.

The additional benefit of cutting harder is not just the dollars that it puts in the bank, but the added cred that you bank, and the way in which old habits are blown away and a new set of expectations hastily cobbled together by the assembled mendicants.

But the cold fact is that, unlike 1983 and 1996, we already have lots of money in the bank - probably too much, in fact.

Fiscal policy has two purposes - one as short term demand management and one to affect long-term intergenerational consumption. On demand management, all the risks to the economy are now downside - it makes no sense to shrink demand further at the moment.

On the long run issue, to the extent that it is possible to shift consumption between generations (a point of some dispute), then sustained budget surpluses reduce the living standards of the current generation to the benefit of future ones. But future ones are gonna be a lot richer than us, and anyway in Oz most intergenerational accounts show that we are already forgoing more consumption than we need to to stabilise the tax burden (which, BTW, is precisely why Treasury does not use an intergenerational accounting framework in its Intergenerational Report. When you’re arguing for fiscal discipline good news is unwelcome).

I spent a lot of time in the 1980s defending Treasury’s “deficit fetishism” amongst my friends - we really did run too many big deficits in the 70s and early 80s. Now we’re running too many big surpluses; economists are fighting the battles of the last war.

The size of the deficit/surplus is orthogonal to the spending priorities within the Budget - if you wanted to get rid of Howard’s mendicants, you could do so without affecting the balance between revenue and spending. Just give the money to your own mendicants, or give bigger tax cuts. But that’s politics not economics, and poor politics at that.

On economic grounds, I would give it a 7 out of 10 as it achieves a reasonable balance in the face of conflicting forces - neither too hot nor too cold, while at the same time having an investment fund to draw on in case things turned sour.

I found it difficult to agree with Gittins and Martin on ABC yesterday that the Government should have been much much tougher on government spending. Not in this uncertain climate!

On social grounds, it is a small step forward and I would also give it 7 out of 10.

But in truth I have only just bought the Budget Papers so I have not studied it closely.

As for the Opposition, they should have stuck to their earlier line - that the Budget istoo restrictive and could aggravate unemployment. Instead they are shamelessly taking a bet each way.

From today’s Fin, Nick, you (and Alan) are more in line with the business community than Heather Ridout. I don’t think being in her class would have helped you though, she saves her unalloyed love for whoever has control of Parliament at the time, it seems - wasn’t she workchoices biggest fan; and that shortly before coming Rudd’s keenest backer?

You had a ‘it’s ours by right, leave it to us, go away’ thing going on all year with a one-off forced-grace kind of patriarchal benefactor ‘here you go’ handout.

That attitude stank.

Rudd has changed that, and I wonder if he considers that aspect of the budget to add any extra marks.

Why would you put you and your supporters through the political pain when a highly restrictive fiscal stance is at least as likely to turn out badly as well?

This is the answer, I suspect:

The additional benefit of cutting harder is not just the dollars that it puts in the bank, but the added cred that you bank, and the way in which old habits are blown away and a new set of expectations hastily cobbled together by the assembled mendicants.

As is this:

a Budget surplus was a handy thing to have in the Asian financial crisis a couple of years later. That wasn’t predictable in 1996

Presumably you can safely predict that the business cycle will turn.
Not to mention the more to give away later (ie when there is an election).

I really can’t see the economic case for the horror budget you’re pushing here other than masochism. Hawke had a good macroeconomic reason for it, but Howard’s 1996 motivation was was all politics and small-government philosophy, not macroeconomics (though I’ll concede that a Budget surplus was a handy thing to have in the Asian financial crisis a couple of years later. That wasn’t predictable in 1996 though). The economy is already slowing quite sharply (that GDP forecast is optimistic), and fiscal stance was already moderately tight. Why would you put you and your supporters through the political pain when a highly restrictive fiscal stance is at least as likely to turn out badly as well?

Sometime in 2009-10 the Government will have a positive net worth, probably for the first time.

I don’t understand this. Does this include a net present value of future tax receipts as well as the NPV of the super (and any other) liabilities? What about the valuation of the ability to raise taxes????

I would have thought that the Australian government would be worth an incredible amount.