The budget deficit
remains well contained
Mr Hockey’s budget distortions
were yet again exposed with the release last Friday
of the Department of Finance Monthly Financial
Statement for November. The release from Finance
Minister Mathias Cormann is here:
http://www.finance.gov.au/financial-reporting-and-
accounting-policy/annual-and-monthly-reporting-
processes/mfs-november-2013.html
The Department of Finance numbers should be
trusted, despite the fact that Mr Cormann got the
date of the press release wrong (it’s 2014 now).
The budget numbers for 2013-14 show an
improvement, yes improvement, from the bottom
line revealed in the Pre-Election Fiscal Outlook, with
only a small undershoot in the budget bottom line.
This is in contrast to the $17 billion blowout
manufactured and presented by Treasurer Hockey
and Mr Cormann just before Christmas when they
released the Mid Year Economic and Fiscal
Outlook.
Let’s have a look at how the budget was tracking
before Hockey and Cormann played the fiscal pea
and thimble trick.
With just under half of 2013-14 gone, Mr
Cormann’s figures show that the budget deficit
widened by just $2.9 billion compared with the
numbers released at Budget time in May under
former Treasurer Wayne Swan. Note, the
comparison is with the budget time numbers and
not PEFO.
Recall that the PEFO, which was prepared before
Hockey and Cormann got to Treasury and they
fudged the numbers, revised the budget deficit from
$17 billion to $30 billion, based almost exclusively
on weaker economic parameters. As noted
previously, this is a deterioration of about $1 billion
a month, which is well below the $600 million a
month shortfall shown in Mr Cormann’s financial
statement.
If this trend were continue for the remaining seven
months of the year, the budget deficit for 2013-14
would be around $22 billion, well below the PEFO
number of $30 billion and light years away from the
clear distortions that saw Hockey and Cormann
conjure up a deficit of $47 billion.
I should note that the extra $25 billion in the
2013-14 budget deficit produced by Mr Hockey in
MYEFO from what is likely to be the actual outcome
was due to two simple things. First, policy
decisions from the new government (spending a
thumping $8.8 billion on the RBA for instance) and
second, Treasury being brow beaten into putting in
overly pessimistic economic forecasts to make the
deficit appear bigger.
With five months of the year having passed, it is
now pretty clear that Mr Hockey inherited a budget
in good shape with a small deficit. The economy is
obviously stronger than Mr Hockey suggests. It is
one that was (and still is) on track to record small
deficits this and next year and probable surpluses
by 2016-17.
Mr Cormann’s own figures confirm that.

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