INDEPENDENT ANALYSIS SHOWS GOVERNMENT’S MYEFO ASSUMPTIONS BLOW THE BUDGET BY $260 BILLIONPosted March 26, 2014
The Government has sought to blow out the size of the debt and deficit over the next decade as part of a clear and deliberate strategy to cynically mislead the Australian people about the previous government’s legacy and to set the scene for severe cuts to services and more broken election promises.
The analysis shows the impacts of these decisions are huge when it comes to deficits and debt over the next decade. For all his complaining in Opposition, this shows once and for all that Joe Hockey is the Masterchef of cooking the books.
Labor commissioned the Parliamentary Budget Office (PBO) to independently cost the medium term budget figures had the Coalition not committed to nearly $14 billion in new spending and if Labor’s medium-term fiscal strategy been maintained.
We have understood for some time that the government’s first budget update included a number of cynical decisions that painted a distorted picture about the future state of the budget. But the scale of the dodgy accounting is breath-taking.
The PBO report shows that:
· Net debt would be a whopping $260 billion less than the $370 billion projected in MYEFO.
· Gross debt would be $270 billion lower by 2023-24 – a huge 40 per cent decline on the $667 billion figure in MYEFO.
· The budget would be in surplus by $34 billion by 2023-24 – a $46 billion swing from the $12 billion deficit in MYEFO.
This analysis confirms that the government’s secret decision to drop Labor’s fiscal rules dramatically inflated the current debt situation, painting a doomsday picture to build support for its ideological drive to deliver massive cuts in the upcoming budget.
Labor will not stand idly by as the Abbott government sets out to deliberately mislead the Australian community about the true state of the Budget.
Despite managing the budget through a difficult period plagued by the global financial crisis, Labor left the budget with one of the lowest net debt positions of any advanced nation around the world and with a triple-A credit rating and stable outlook from all credit ratings agencies – we remain one of only eight countries currently with this badge.
Key operational aspects of Labor’s medium-term fiscal strategy were to:
· keep taxes low - taxation as a share of GDP, on average, below the level for 2007-08 (now 23.6 per cent); and
· build growing surpluses by holding real growth in spending to 2 per cent a year, on average, until the budget surplus is at least 1 per cent of GDP, and while the economy is growing at or above trend.
Labor delivered on this strategy. Budget documentation shows that:
· following Labor’s recession busting stimulus real growth in spending averaged 1.4 per cent from 2009-10 to 2012-13.
· Actual spending from 2009-10 to 2012-13 and projected spending out to 2016-17 averaged less than 2 per cent.
· 2012-13 was the first time that nominal spending declined in more than 50 years.
· Labor delivered more than $130 billion in savings following the implementation of its jobs savings stimulus.
Treasurer Joe Hockey has some serious explaining to do – why did he exclude Labor’s medium-term fiscal strategy from his forecasts? And why did he try to blame Labor for the $14 billion of additional spending he’s committed to since the election
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