Will the real fiscal conservatives please stand up?

With the marked deterioration in the economy over the last 12 months, the Rudd Government felt compelled on Tuesday night to deliver the biggest budget deficit in Australian history.

But despite the deficit, the Rudd Government has been big on keeping its election commitments, a task that is becoming very difficult since the recession knocked the stuffing out of public finances, and Rudd is doing an admirable job in light of the circumstances.

One of the key commitments in Labor's election campaign was Labor's pledge to keep the budget in surplus "over the cycle". This promise was a cornerstone of Rudd's branding as a "fiscal conservative", as voters were promised a new Labor era of fiscal austerity, backed by strong election commitments to maintain budget finances.

So will the Rudd Government keep the budget in surplus over this economic cycle?

The answer is, no.

The table below sets out the actual budget outcomes and forward estimates and projections by dollar amount for the period of the last economic cycle, the bust-boom of 1987 to 2008, and for the current economic cycle, the boom-bust of 1998 to 2013. The net position for each cycle, as well as the position over each boom and bust, is tallied at the bottom of each column.

(Sources: See here (PDF 108KB) for historic figures and here (table 1) for forward estimates and projections.)

As the Coalition has pointed out, the forward projection figures are a bit rubbery, particular up to 2014 when we apparently will return to surplus, but they are sufficiently accurate for discussion purposes.

So what do the figures tell us?

Over the last full business cycle, there was a net surplus of $42 billion.