One of the more memorable questions amid the chaff of parliamentary Question Time has come from the youngest MP in the chamber — Queenslander Wyatt Roy, who will celebrate his 22nd birthday next month.
The LNP Member for Longman asked how long it had been since a federal Labor Government had delivered a Budget surplus?
It was such a good a question, and amused his colleagues on the Opposition benches so much, that the precocious Mr Roy has bowled it up a couple of times now.
In fact, there has never been a Labor Budget surplus in Mr Roy’s lifetime; former Treasurer Paul Keating delivered the last Labor surplus in 1989-90.
Now Treasurer Wayne Swan (who has not delivered anything approaching a surplus in his four years in the job) is staking his reputation, and that of the Government, by re-pledging a promise to achieve a surplus in the 2012-13 fiscal year.
When Swan delivers his Budget speech early next month, either he is risking a lot of credibility or there is going to be a seismic shift in Australian governance.
In other words, there will be lots of big talk and creative accounting and/or the Budget will not return to surplus next year anyway — or the Government is intending to make some very significant structural changes to the tax and transfer system.
The size of the task facing the Government needs to be put in some perspective.
When Wayne Swan delivered his annual Budget speech last year, he predicted there would be a $20 billion deficit this year (2011-2012), but still promised to turn this around the following year (2012-13) into a $3.5 billion surplus.
It now looks as though that predicted $20 billion deficit for this year will turn out to be closer to $40 billion, due largely to falling company tax revenues.
In other words, we’ve gone backwards a further $20 billion; yet Mr Swan says we are still going to achieve a Budget surplus of $1.5 billion next financial year.
Respected economic commentator, Saul Eslake, who is chief economist with Bank of America-Merrill Lynch Australia, puts Swan’s task in an historical frame of reference.
“(It is the) equivalent, on the projections that we have at the moment, to a turnaround in the budget balance of 2.5 percentage points of GDP (gross domestic product),” Mr Eslake told ABC radio.
“That is a bigger positive movement from one year to the next than we’ve seen in any of the 57 years for which we now have internally consistent data.”
And what does taking 2.5 per cent out of GDP actually mean?
The Melbourne Age newspaper’s Tim Colebatch’s take on Swan’s quixotic attempt to bring the Budget to surplus went like this: “That is equivalent to shutting down the entire electricity industry, all arts and entertainment venues and all airline travel for a year.”
Could it be achieved?
Of course it could. There could be significant tax rises, there could be large withdrawals of industry subsidies and tax breaks, there could be the abolition of negative gearing, or the severe pruning of tax concessions on superannuation, or there could be a wholesale savaging of middle class welfare.
There could be a massive attack on government waste and a thorough re-examination of programs.
However, whether the Government has the stomach to do some serious cutting in its present state of high unpopularity is doubtful.
It is more likely there will be some sleight-of-hand movement of funding — bringing forward receipts and deferring items of expenditure — in defence, for example.
Swan is an extremely cautious Treasurer in terms of not wanting to alienate voters, and it would go against everything he believes in if he chopped into welfare programs.
Whether the Budget is in surplus by a billion or two or in deficit by a billion or two is not particularly important in the current circumstances, especially given the chronic indebtedness of other Western governments.
However, the surplus/deficit issue goes to the question of which party is better equipped to manage the economy.
With very little else to go on, Labor has now decided that economic management is its best means of re-election. It intends to paint Mr Abbott, who has made many promises including ones to abolish the carbon and mining taxes, as economically irresponsible.
After having guided Australia through the global financial crisis (GFC) without economic calamity, Julia Gillard and her Treasurer believe they have achieved a certain stamp of credibility as sound economic managers.
It is a misguided strategy. First, voters tend to believe the Coalition is generally better equipped to run the economy regardless of any Labor achievement in that area. Second, household wealth has fallen by more than 10 per cent in the past few years and families are feeling the pinch of cost-of-living pressures. And third, if Swan fails to achieve his fiscal goal, he is setting himself up for failure and ridicule.
If a surplus is not achieved in 2012-13, and Labor subsequently loses the election, Mr Roy could be a middle-aged man before he witnesses a Labor Government deliver a surplus.