Figures to test Wayne Swan's restraint on spending
![Treasurer Wayne Swan]()
Wayne Swan, during question time yesterday, is facing pressure to make changes to the mining tax. Picture: Gary RamageSource: The Australian
- The Australian
- February 15, 2013
- 12 comments
Wayne Swan, during question time yesterday, is facing pressure to make changes to the mining tax. Picture: Gary RamageSource: The Australian
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.
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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