I’m afraid S&P that you have missed an excellent brand repair opportunity in Australia, via David Uren:
The projected budget surplus of about $1.1 billion will be achieved only because of a reclassification of about $4bn in Future Fund earnings in that year, not because of any improvement in underlying budget performance.
An accounting change introduced in last year’s budget means the Future Fund profit will be included in the government’s accounts for the first time in 2020-21. The budget papers count on strong growth in Future Fund earnings, rising from $2.8bn this year to $3.9bn by 2019-20.
Deloitte Access Economics partner Chris Richardson said it appeared that much of the predicted improvement in the budget bottom line — from a $10bn deficit in 2019-20 to the small surplus in 2020-21 — would come from the change in treatment of Future Fund earnings.
…Economist Saul Eslake, who first detected the changed accounting treatment contained in a footnote to a chart in last year’s budget, said the government lacked transparency. “An ASX-listed company would not have gotten away with presenting such a material accounting change by way of a footnote to a graph,” Mr Eslake said.
Since the government set the standards for private companies, it should meet them itself, he said.
…Without the change in accounting treatment, the budget not only would be in deficit in 2020-21 but would scarcely do better than break even out to 2026-27, under Treasury’s medium-term projections. These projections show the budget would achieve, at most, a surplus equivalent to 0.3 per cent of gross domestic product in that period.
This is a real estate agent budget produced by nothing more than glorified spruiker in the Property Council Treasurer Scott Morrison. Under-quote costs for the buyer (the Australian people) and over-estimate revenue for the vendor (the ratings agencies) then lie, lie, lie your way to prosperity!
John Hewson gets it:
Projecting a rapid return to 3 per cent real growth (stronger than our “long-run potential growth”), together with a rapid pick up in wages and inflation – aided by also “assuming” the passage of expenditure cuts they haven’t been able to pass through the Parliament in the last couple of years and, hey presto – they could foreshadow a budget surplus by the end of this decade.
This superficiality is genuinely alarming, ignoring the realities of the riskiness and unpredictability of the global economy, and of the structural challenges in our current and prospective domestic economy, perhaps now actually teetering on the brink of a recession.
Just how is our economy to not only recover from the 0.5 per cent fall in growth in the September quarter, but actually produce a “growth spurt” as assumed through to the end of the decade – which industries, which jobs? None of this can simply be “assumed”.
It is most sobering to realise that the accumulated budget deficits (relative to GDP) since the GFC already dwarf those that followed each of the previous two recessions, and we haven’t had a recession, rather we are now in our 26th year of continuous growth.
Worry not, John, we’re lying our way to riches. Lying, mate!