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Budget cuts? You must be kidding.

By David Leyonhjelm - posted Thursday, 27 December 2018


If the Government’s financial statements were subject to the same rules as a private company, Treasurer Frydenberg and Finance Minister Cormann would be at risk of going to jail.  They are the Commonwealth Government’s version of the dodgy brothers.

Their mid-year budget update has more shifting of the goal posts than the Darwin Football Club at Christmas in 1974.

For years the Coalition Government has promised that their decisions to spend more would be fully offset by decisions to spend less. Yet in May, at Budget time, the Coalition creatively re-interpreted this commitment to exclude the financial year in which the budget was announced — 2017-18. 

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This exclusion allowed the Coalition to make new spending decisions without offsets.  All it needed was to get the money out the door before 1 July 2018. 

There were various ways it did this, such as the $443 million grant to a charity called the Great Barrier Reef Foundation.  It also threw $500 million at the Defence Department, only to announce a claw back of $488 million of this over the subsequent four years.  According to the Coalition’s reinterpreted commitment, the $500 million splurge was ignored while the $488 million claw back can be counted as a spending cut demonstrating the Coalition’s fiscal virtue.

Now, in the mid-year budget update, the Coalition’s commitment to offset new spending is more tortured than a visitor to a Saudi embassy.

The Coalition has made decisions to increase net spending by $2.5 billion extra this year, $3.6 billion extra next year, and around $3 billion extra in each of the subsequent years.  So the Coalition is not offsetting decisions to spend more with decisions to spend less, although it claims it is.

The Coalition says it is meeting its commitment if, when calculating the impact of its spending decisions, it includes the downward revision of previously over-stated spending forecasts. By this logic, if the Treasury bureaucrats accidentally add on an extra zero in their spending forecasts, then discover the error and take off the extra zero at the next budget update, the Government can declare that it has made a tough decision to cut spending.

In other words, to assess the Coalition’s spending decisions, it wants us to include changes to spending forecasts that have nothing to do with its decisions. Even worse, it only adds some of the corrections of previous forecasting errors into its calculations and doesn’t set out which corrections are included and which ones are not.

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This suggests that Australia’s budget documents are being prepared by creative accountants in cahoots with lawyers from Shyster and Shyster.

But there’s more. The Coalition had to further torture its commitment to offset all new spending, because even after adding in the correction of previous forecasting errors, it found that it was still increasing net spending.

So it decided to say that one of its spending increases — providing early access to welfare for migrants and more welfare to families on six-figure incomes — wasn’t actually a Coalition spending increase.  It excluded this billion‑dollar spending increase from its calculations and, hey presto, it can now pretend that its decisions involve a net reduction in spending.

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This article was first published in the Australian Financial Review.



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About the Author

David Leyonhjelm is a former Senator for NSW who is contesting the current New South Wales state election for the LDP.

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