Budget forecasts from our Treasurer: incompetent or just irrelevant?

Ken L has a post up at Surfdom well worth reading: Headlines you’ll never read

Costello budget hopelessly wrong

Last May, the government forecast a surplus for 2006/07 of $13.6 billion. Today, it announced that the figure was actually $17.3 billion. My simple maths suggests that the government was therefore wrong by a margin of 27%, all in the space of three months.

In a rational world, this news would be greeted with one of the following two reactions:

– Teh Economy is actually a big wild beast that does pretty much whatever it wants without paying any attention to the likes of Tip Costello, or
– Tip is so incredibly incompetent his forecasts don’t come within a bull’s roar of reality.

Needless to say neither point has been given much breathing space. No, the evidence of the government’s inability to uncover the most basic information about Teh Economy is once again hailed as a triumph, and we are all encouraged to gasp in awe at the spectacle of a wise Treasurer who continues to collect more tax than he said he would so his increasingly unhinged boss can waste it on his national aspirations.

Now, regarding Ken’s two options, I’m not a big fan of either/or thinking, so in this case I plump for both/and: The Economy is wild making Costello’s plans for it irrelevant, and his attempts to analyse and predict the behaviour of The Economy are so coloured by the belief that his plans make a difference that those plans are wildly unrealistic and thus Costello is also incompetent.

The shallowness of the analysis on offer in the old media is appalling – they are appropriately cynical that these magic billions are merely being hauled forth for the purpose of a pre-election spending spree, but that’s just kneejerk cynicism. As Ken says, they’re not asking the more deeply skeptical questions about the vaunted economical management of Howard and Costello in light of this astonishing miscalculation.

There is at least some attention being paid to the fact that Howard’s proposal to salt away budget surpluses (both planned and windfalls? it’s not clear whether it will apply to windfalls such as this) in a fund for future infrastructure is mere copycatting of Labor’s plans to do the same, which I believe the Coalition poured scorn upon initially. In this case I can’t see a both/and solution and have to plump for the dichotomy: either the Coalition is a bunch of against-it-before-I-was-for-it flip-floppers cynically stealing policy, or the Coalition have engaged in principled evaluation of future policy needs in light of a demonstrated planning gap. What do you reckon?

Ken L seems to regard a quarantined infrastructure fund as merely a pretext to overtax the electorate in perpetuity, a view with which I don’t entirely agree. It would be nice to think that our Government, whichever of the two big parties ends up in power, would adequately provide for the maintenance and innovation of infrastructure as part of the standard provision of services covered in Budgetary planning, but that hasn’t been the case recently, so perhaps we do need to have a quarantined fund just for infrastructure to make sure that infrastructure gets its proper ongoing evaluation for the benefit of us all.

Categories: economics, Politics

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2 replies

  1. $weetie is a (non practising) lawyer (as are 70% of MPs – now THAT bears looking at…)and probably no more numerate than the journos. who breathlessly report on “beautiful numbers”.
    However, he fronts a department full of “Dismal Sciencers” who eat our bread but when have you EVER heard them get anything right?
    Every release of ABS figures is reported as “exceeded/defied/below/against…” market/expert (sic!) prediction yet still they are fed and paid 6 figure sums. That’s just in the civil service, imagine what the privateers gouge.
    How did we ever manage without economists?

  2. As President Bartlett said in season 2 of The West Wing: “OK then, bring me the projections, a ouija board and a magic wand.”

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