Abbott and Hockey: Dodgy brothers budget repairs

Wed, 01 Oct 2014  |  

The report in the Australian Financial Review today confirms that the Abbott government's fiscal strategy is in tatters.

Elected on a platform to 'fix the budget' and tackle the 'budget crisis and emergency', the Abbott government is now planning a mini-budget in December to deal with the fact that its policies have resulted in a budget deficit blow out that at this stage, looks to be about as significant as some of the misses of the previous government.

According to the AFR, the Abbott government has capitulated on measures that would have lowered the budget deficit by around $30 billion over four years, which only adds to the frenzied spending by the Abbott government on RBA payments, national security, roads, defence and paid parental leave, among other things. Add to that a negative shock from the fall in commodity prices and the terms of trade, and the budget deficit projections that will be in Mid Year Economic and Fiscal Outlook will dwarf the numbers the Abbott government inherited in Pre-Election Fiscal Outlook.

Of course, the government can 'recast' its fiscal strategy and in the MYEFO outline spending cuts and tax hikes as it summons all of its zealotry on getting a budget surplus as quickly as possible. The problem with this is that it would occur at a time where even blind Freddie can see the economy is sliding into a sub-trend growth, disinflationary funk. The very fall in commodity prices that is hurting the budget bottom line, is also squeezing economic growth. A round of fiscal austerity in December would be foolhardy, risking a move similar to the silly policy trap that dogged so many European countries when fiscal policy was tightened during the crisis which only exacerbated the recession many were mired in.

It would be folly for Treasurer Hockey to tighten fiscal policy when the economy was already at significant risk of slipping deeper into the economic quick-sand.

For the record, these are the budget numbers inherited by the Abbott government. They are the budget balance (surplus / deficit) numbers calculated in the PEFO in August 2013.

2014-15   -$24.0 billion
2015-16   -$4.7 billion
2016-17   +$4.0 billion

A quick back of the envelope calculation which takes account of the policy flip flops and revised economic parameters, and without seeing any policy changes that may be announced in the next two months, suggests MYEFO will produce budget deficit numbers as follows:

2014-15   -$34 billion
2015-16   -$25 billion
2016-17   -$15 billion

In these three years, that would represent a fiscal blow out of around $50 billion compared with the PEFO numbers.

With a fiscal repair job as misguided as that, it is little wonder the community and business sector are losing faith in the government they elected so convincingly just over a year ago.

The AFR article is here: 

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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link:   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced.