Twenty years ago, Peter Costello, one of Australia’s most formidable Treasurers, began overhauling a budgetary process littered with smoke and mirrors. The public’s trust in the ability of politicians to manage finances had dropped sharply in the wake of Keating’s backflip on his l-a-w law tax cuts.
Costello responded with the ‘Charter of Budget Honesty, chipping away at the duplicitous financial reporting tricks previously used by governments to embellish their financial management. The proceeds from privatised state assets could no longer be used to bump up the budget’s bottom-line, and intergenerational reports would follow to give a clearer picture of the country’s fiscal future and what burden the decisions of the day could leave our children and grandchildren.
Unfortunately, the coming of Wayne Swan and his successor Treasurers has seen Costello’s legacy dangerously dismantled. We’ve seen new tricks – such as ‘10-year forecasts’ – used to justify all sorts of unfunded boondoggles on the premise of optimistic economic forecasts that may never come. These are easily weaponised into ticking time bombs set to blow in the face of an incoming government left committed to them.
We saw this with the NDIS and Gonski funding packages which had their expenditures backloaded and justified based on 10-year forecasts about the performance of the volatile commodity price cycle, with the Abbott government left with the inconvenient question of how to ensure their funding.
Anyone who has at least stayed awake through Economics 101 understands how the unpredictability of the global economy makes it asinine to use such revenue projections to legitimise the spending addiction of governments. With the International Monetary Fund noting that most of the world is undergoing favourable economic conditions which are unlikely to last, this should concern all of us.
Wayne Swan’s Nostradamus shtick and fanciful 10-year projections of revenue that never flooded into the government’s coffers have only left taxpayers with unjustified bills for government largesse while the wool was pulled over our eyes.
And Swan isn’t the only one who deserves blame.
The current government has continued the malfeasance, using the same shaky 10-year forecasts to bolster its budget projections. How can any rational person assume growth will proceed on its current trajectory unhindered when rising interest rates, a Chinese slowdown and accelerating trade-war-in-the-making are likely to cause rude interruptions?
Rohan Indra is a Research Associate with the Australian Taxpayers’ Alliance.
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