21 September 2012
Labor spending promises call surplus into question
Australian Financial Review
Labor’s fight to protect its economic credentials has intensified after the opposition ended a second week in Parliament targeting the government’s big-ticket spending pledges.
The opposition’s attack has homed in on The Australian Financial Review’s analysis last month suggesting future governments may need to find $120 billion by the decade’s end to pay for Labor’s spending pledges.
Every day during the past two weeks in Parliament, the government has faced a barrage of questions about how it plans to close that gap.
Treasurer Wayne Swan, who has dismissed the analysis, argued that the government would find savings in the budget to meet its commitments, while at the same time telling his party room that he was “not attracted” to the idea of raising taxes.
Mr Swan has also been forced by the opposition to declare whether he would rule out boosting a range of taxes and concessions – ranging from death duties to superannuation.
The government has hitched its economic strategy to delivering a $1.5 billion surplus this financial year.
However, economists and budget modellers have warned that the shortfall may be at least $10 billion due to a collapse in commodity prices.
At the same time, the Labor back bench is showing signs of alarm about how the government will fund its most recent promises, including a national disability insurance scheme and the Gonski education boost.
Opposition Leader Tony Abbott said the government was putting the nation’s economic future at risk by spending money it didn’t have.
“That’s why this $120 billion budget black hole is going to haunt the Prime Minister right up until the next election,” he said yesterday.
Former Reserve Bank of Australia board member and head of the Manufacturing Australia group Dick Warburton said Labor would have no choice but to adjust its budget, given falls in commodity prices.
Without action, he said, the country risked falling into the same trap as Europe.
“The federal budget surely will need to be adjusted, particularly with the extraordinary promises they’ve made, combined with the falling terms of trade,” Mr Warburton told the AFR.
“You can’t just keep going, otherwise we’ll finish up in a Spain, Greece or Portugal-type situation, which I hope to hell we don’t ever get to.”
Mr Swan, who has repeatedly slammed the opposition for trying to “trash the Australian economy”, yesterday ridiculed shadow treasurer Joe Hockey for a blunder in question time on Wednesday.
Mr Hockey had sought to use a media report about a Standard & Poor’s analysis on Australia’s credit rating, which incorrectly claimed the budget deficit would be $20 billion.
“He should have known how wrong it was,” Mr Swan said.
“They should unreservedly apologise for the fact that they used incorrect information in this House to run down our economy.”
Mr Swan again promised to deliver a surplus this year and said the government would adhere to delivering a budget update in coming months.
“Those opposite have refused to participate honestly in the charter of budget honesty,” he said.
“On breakfast television last year we saw the shadow treasurer say there was a $70 billion crater in the Liberal Party’s budget line.”