Tuesday, May 08, 2012

Australian budget day - what will I examine?

Budget day here in Australia.

Before talking about that, as part of a university course youngest is required to keep a weekly philosophy log. She chose a blogging format! The result is Aesthetics tasting pallet. She is, in fact, running a little behind, but has promised to catch up!

The Australian Government's desire to focus attention on the budget, to use it as a political circuit breaker, has been overshadowed by the Craig Thompson affair. The Government has responded by revealing budget details in advance as a way of attracting attention back.

Over on skepticslawyer, Lorenzo's Don’t mention the A-word suggests that Australia has done remarkably well in economic terms, that this has been more than luck and that Australians don't in fact recognise just how well we have done. Now I want to come back to this argument at another point. For the moment, it provides a segue into this brief post. Put aside politics, the Thompson affair and the inevitable packaging language so beloved of modern Australian governments at all level: if Lorenzo is right, what should we be looking for in this budget?

The first thing I plan to look at are the economic assumptions built into the budget. In Navigating the economic forecasting mess, I spoke briefly of the problems associated with economic forecasts. The recent forecasting track record of both the Australian Treasury and, to a somewhat lesser extent, the Reserve Bank has been dreadful. No matter what the headline numbers may be, their validity depends upon the strength of the assumptions used.

The second thing that I will be interested in are the accounting tricks used. I am using the phrase "accounting tricks" in a fairly broad sense. This includes things like raiding hollow logs, to use an Australian term; changes to the accounting treatment of items; and the deferral of spend on particular items to achieve a specific timing effect. These things are not necessarily bad in themselves. However, in combination they can distort the numbers.

I then plan to look at the distributional effects: who loses, who gains and what it all means. The usual media focus here is on direct winners and losers, the effect on particular groups of Australians. This cohort will be $20 per week better off, that group $100 per week worse off. I am more interested in the dynamic effects.

The last thing that I will look at is a simple thing in concept, although the nature of the judgements involved are not simple. Does the budget actually make sense from a public policy perspective?           


Rod said...

The Hollow Men documentary series... oops, I mean The Hollow Men comedy series has an episode on federal budgets which explains the 'Accounting trickery' very accurately and in an easily understandable way... and it is funny.

I tend to agree with you and think that the best analysis will be of how the budget programs (or cuts to programs) show what the Government policy objectives really are.

Anonymous said...

That's a fair summary Jim, and nice to have as a mental list before the speech, rather than later.

This cynic wishes us all well, but feels that a budget surplus is both unnecessary and probably not possible, given the quite large commitments already telegraphed, and the lack of control we can exert over events elsewhere in the world over the near term.

Therefore I'm thinking there will be some understatement of costs coupled with quite rosey revenue forecasts. Just how they can be sussed out though is the real question.

I'll await your thoughts with great interest.


Jim Belshaw said...

Hi Rod. I must re-watch, properly watch, that series. Agree on the second point, too.

kvd, we don't need a budget surplus, although I take the point about the need to rebuild the buffer. We will just have to see about sussing!

Evan said...

Call me a cynic. The policy is to have a shot at getting re-elected. The suffering of parents isn't important compared with this policy objective.