Mr Hockey’s budget distortions were yet again exposed with the release last Friday of the Department of Finance Monthly Financial Statement for November. The release from Finance Minister Mathias Cormann is here:
The Department of Finance numbers should be trusted, despite the fact that Mr Cormann got the date of the press release wrong (it’s 2014 now). The budget numbers for 2013-14 show an improvement, yes improvement, from the bottom line revealed in the Pre-Election Fiscal Outlook, with only a small undershoot in the budget bottom line. This is in contrast to the $17 billion blowout manufactured and presented by Treasurer Hockey and Mr Cormann just before Christmas when they released the Mid Year Economic and Fiscal Outlook.
Let’s have a look at how the budget was tracking before Hockey and Cormann played the fiscal pea and thimble trick.
With just under half of 2013-14 gone, Mr Cormann’s figures show that the budget deficit widened by just $2.9 billion compared with the numbers released at Budget time in May under former Treasurer Wayne Swan. Note, the comparison is with the budget time numbers and not PEFO.
Recall that the PEFO, which was prepared before Hockey and Cormann got to Treasury and they fudged the numbers, revised the budget deficit from $17 billion to $30 billion, based almost exclusively on weaker economic parameters. As noted previously, this is a deterioration of about $1 billion a month, which is well below the $600 million a month shortfall shown in Mr Cormann’s financial statement.
If this trend were continue for the remaining seven months of the year, the budget deficit for 2013-14 would be around $22 billion, well below the PEFO number of $30 billion and light years away from the clear distortions that saw Hockey and Cormann conjure up a deficit of $47 billion.
I should note that the extra $25 billion in the 2013-14 budget deficit produced by Mr Hockey in MYEFO from what is likely to be the actual outcome was due to two simple things. First, policy decisions from the new government (spending a thumping $8.8 billion on the RBA for instance) and second, Treasury being brow beaten into putting in overly pessimistic economic forecasts to make the deficit appear bigger.
With five months of the year having passed, it is now pretty clear that Mr Hockey inherited a budget in good shape with a small deficit. The economy is obviously stronger than Mr Hockey suggests. It is one that was (and still is) on track to record small deficits this and next year and probable surpluses by 2016-17.
Mr Cormann’s own figures confirm that.