Economist calls Federal Budget 'Swan song' on false revenue shortfalls

FEDERAL Treasurer Wayne Swan’s delivery of his latest Budget has been labelled as his ‘swan song’ by Michael Knox, chief economist and director of strategy at RBS Morgans. Mr Knox blames the deficit on over-spending, not revenue declines, as Mr Swan painted in his Budget speech.

“We balance the Budget by spending less than we earn,” Mr Knox said in his Budget review. “We all know that in a perfect world, income would rise so that we could afford whatever we wanted to spend.

“However, most of us have learnt that in the real world, we have to reduce our spending to no more than our income. That is how we balance our budget.

“The Treasurer has told us that incomes did not rise as rapidly as he hoped. He therefore blames incomes for the reason he could not balance his budget.” Mr Knox referred to a chart of Australian Government Sector spending as a percentage of gross domestic product (GDP).

“This is drawn from Table 1, page 10-6 of Budget Paper No.1,” Mr Know pointed out. “In the period of the previous government, payments fall from 25.1 percent of GDP in 2000/2001 to 23.1 percent of GDP in 2007/2008. This is the level of spending when Wayne Swan first strode to the Treasury benches.”

Mr Knox said spending would “never be as low again as it was in 2007/2008. Over two years to 2009/2010 it rose to 26.1 percent of GDP. Only then did it peak,” he said. “It then began to decline. In 2013/2014, it has declined to 24.5 percent of GDP. This is still 1.4 percent of GDP higher than it is when Wayne Swan took office in 2007/2008.

“The result is that in 2013/2014, Wayne Swan produces a deficit of 1.1% percent of GDP. If spending was the same as in 2007/2008, the result would instead be a surplus of 0.3 percent of GDP.”

Mr Knox said the concerning issue was that even in trying to claw back into surplus, The Labor Government’s Budget would not return to the inherited spending levels.

“It is important to note that even out in the distant year of 2016/2017, spending is still estimated to be 23.8 percent of GDP,” Mr Knoz said.

“This is still 0.7 percent higher than it was in 2007/2008.”

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*RBS Morgans is an Industry Expert member of Queensland Leaders, the organisation mentoring business leaders and the next generation of leading companies based in Queensland.

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