The media and Government continue to dance the surplus gig today. Apparently we may not reach it! Whocouldanode? From the AFR:
The Gillard government is preparing to dump its commitment to a budget surplus if economic growth slips below its long-term average in the current quarter.
While federal cabinet’s expenditure review committee has met in Canberra this week in a desperate search for savings to keep its surplus commitment alive, sources point to the multiple statements from senior government ministers that link the budget surplus commitment to stronger levels of economic growth.
Treasurer Wayne Swan conceded on Wednesday that the nominal growth recorded in the September quarter national accounts was “somewhat weaker” than the mid-year budget review.
…In the wake of Wednesday’s release of the September quarter national accounts, Mr Swan was reluctant to concede that, on the basis of one quarter, the argument could be made that growth had dropped below trend, though he did concede nominal GDP growth had now dropped below levels envisaged in the mid-year budget review.
There are now indications the government will look for an official confirmation of the slowdown in the next national accounts – due for release on March 6 – before resetting its rhetoric and fiscal goals ahead of the May budget.
If you ever wondered about the power of narrative and political choreography, the pasty two years of dancing surplus marionettes should surely make you a permanent cynic. There will be no surplus this year or any other year. In the era of disleveraging and relatively balanced commodty markets, it is just not possible. It’s simple sectoral balances arithmetic. When you run an external sector deficit and the private sector does not wish to expand its borrowing, by definition the public sector cannot reach surplus. It’s called “math”.
