Zen and the Art of Budgetary Malfeasance (Part 1)

This week the federal government handed down its 2009/10 budget which was “forged in the fire of the most challenging global economic conditions since the Great Depression” as our Treasurer so eloquently put it. This fact that this was probably the hardest (and most important) budget in my lifetime is hard to dispute. For the majority of us, this is the first time in living memory we are seeing a coordinated global slowdown of such magnitude. To put it another way, the world economy has completely tanked, making the decisions and policies our leaders make right now all the more critical.

As an aside, it sounds to me like Swanny and his boss K-Rudd are just showing off their inner geeks with this blatant Lord of the Rings reference (I’m not disputing my own not-so-inner geek for noticing it). But I digress.

Let me first say that I agree that we need to be in debt and running a deficit at this time – if the Libs were in charge we would be talking about numbers in the same ballpark. However the key thing for us random punters out here in Middle Australia is 1) How we are spending this debt (including the stimulus packages) and 2) How the hell we are going to get out of it. But more on that in Part 2. For now let’s look at this so called “temporary deficit” and specifically how this government has been trying to sell itself as responsible stewards of the Australian economy.

In the weeks leading up to last Tuesday, our expectations were deftly managed by the government’s spin team. We were told that “hard” decisions had to be made and that we all needed “to do our share” in this time of crisis. Everyone expected a large headline number – but when the 58bn deficit was finally leaked it was almost too large to get your head around, especially considering the starting point. Kind of our very own Dr. Evil moment, but in reverse.

For me though, putting the specifics to one side, the most ridiculous part of the rhetoric coming from the government was the fact that every time the word “deficit” was uttered the word “temporary” had to be used before it. It was pretty clear that Big Kev and his cronies had sent round a strongly worded memo to everyone, just like a few months ago when no-one was allowed to utter the r-word (recession). To paraphrase Kylie, what kind of fools do you take us for? Ever since the GFC started back in September 08, Labor has been at great pains to say that they are being up-front and honest with the Australian people but they have been anything but. Guys – seriously - stop taking the piss. If it looks like a turd and smells like a turd, it’s a turd – don’t try to tell me it’s a sausage roll.

Moving on, the budget papers predict that we will be out of deficit by around 2016/17. That is two elections away by the way. It’s based on Australia springing out of the current recession at growth rates of around 4.25% in just two years time. Now I’m certainly no economist (though I have been known to make stuff up, I don’t pretend to believe in it for a second) but I’m not alone in thinking this is at best rather optimistic and at worse, well bullshit. This is not a temporary deficit. Again, Labor is taking us for a bunch of idiots. Sure, over a long enough time-frame, everything is temporary, which is certainly a very Zen way of looking at things. Sadly I sincerely doubt that Labor is trying to introduce Buddhist teachings into its fiscal policy…except for tolerance perhaps.

Back to this “temporary” deficit. Government debt is projected to peak at 188bn in three years. This is before paying for self-indulgent rubbish like Rudd-Net and Rudd-Bank. Not to mention the interest bill for all this debt which our kids will be paying off.

The other incredibly optimistic part about the budget is that it assumes the current government can cap spending increases to 2% over time. Based on Labor’s track record this is again, pure bullshit. Did I mention that there were two elections between now and when we will allegedly be back in surplus? Labor is splashing it around today 18 months out from an election. Imagine the promises we will see during the next election campaign when K-Rudd is out there making sure that he gets to keep his job as King of Australia. There is no way on God’s green earth that Labor government spending can and will be capped and that this is the end of the big splurge. I mean Big Kev already wants to be in the broadband business (ironically without a business plan). What’s next – Rudd-Air? Rudd-NN? I think we can safely say that this is not the end of the Labor gravy-train.

Hopefully the only thing temporary about this deficit is the government that introduced it.