Labor's Deficit - an interesting picture

Reply Fri 17 Aug, 2012 08:37 pm
I was interested in the Total Tax Revenue of the US as compared to Australia, and I came across this chart from the ABS (Australian Bureau of Statistics) http://www.abs.gov.au/ausstats/[email protected]/Latestproducts/5506.0Main%20Features22010-11?opendocument&tabname=Summary&prodno=5506.0&issue=2010-11&num=&view=

Now I've seen another ABS chart for the 90's, and noticed on that one that Tax revenue increased 12-20% each year during those years.

So presuming that Federal Revenue was increasing $15-$20B every year (the figures at the start of the above chart, prior to the 2007 GFC), it gives an interesting take on the Budget Deficit.

When setting a budget, you of course have to forecast your revenue, and given that we'd had 15 years of solid increases, it should have been safe to forecast the following budgets (on a conservative increase of $15B per year) :
2008-9 : $300B
2009-10 : $315B
With these sort of forecasts, you are of course going to plan many expenditures years in advance, and commit to many financial obligations years in advance (eg Enterprise Bargaining agreements)

But rather than the forecast, the actual revenue figures were
2008-9 : $278B = shortfall $22B
2009-10 : $268B = shortfall $47B
2010-11 : $288B = shortfall $42

Making the total shortfall = $111B

Now that's a conservative shortfall because the previous 2 increases prior to the GFC were $17B and $23B (I used $15B above), so it could be argued that a safe forecast would have included another $10-$15B or so.

Add in the costs of a stimulus (and no matter how unpopular the 'lending' is, every economist agrees it was necessary) and Labor isn't looking so bad (I'm apolitical btw, and will probably be voting independent next election, seeing as I don't like either party at present) as previously thought (in a lot of voters minds) in terms of economic management, and the amount they borrowed.

Of course, as budgets are forecast, and no forecast includes a sudden world recession - all monetary stimulus (ie not including interest rate stimulus) comes from borrowings.

I found this other chart with Budget figures from 1970 onwards - it's a little bit down the pdf. It has somewhat different figures, and I can't tell you the difference.

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