Rudd’s "spend-a-thon" has the budget "blowing out by $3 billion a week".
Tony Abbott on Sunday, August 4, 2013 in a press conference
Abbott says Rudd’s “spend-a-thon” has the budget “blowing out by $3 billion a week”
The fiscal electoral war of words is being fought by two sides from the same budget bunker, that of financial responsibility.
The ALP camp says the Coalition’s policies will create a $70 billion budget black hole (see our fact-check on this).
Liberal leader Tony Abbott says prime minister Kevin Rudd is on a spend-a-thon which means the budget is blowing out by $3 billion a week.
Abbott later clarified this in an interview on ABC Radio’s AM: "The Budget’s deteriorated by $3 billion a week since May."
The message is that Labor has made a mess of the nation’s finances and that the Coalition will get the budget under control.
Certainly the tax revenue disappoints, with each forecast subsequently found to be an overestimation.
But is spending the culprit? Or as Abbott puts it: "Who do you think is more fair dinkum? ...The people who have actually delivered surpluses or the man who started the spend-a-thon which has got us into the fiscal position we're now in where the budget is blowing out by $3 billion a week?"
This spending theme has been taken up by others including Greg Hunt, Shadow Minister for Climate Action, on the ABC TV’s Q and A program on August 5:
"I say we need to live within our means," Hunt said. "A simple example, this year our debt will be $30 billion.
"This year what we see is that government expenditure has grown by $30 billion. The entire volume of our deficit for this financial year is explained by government increases in expenditure."
And shadow treasurer Joe Hockey: "The Budget has fallen $3 billion a week over the last ten weeks."
The latest economic statement says real spending for the financial year just ended (2012-13) was 3.2 per cent less than the previous year. This estimate will be finalised when the Budget Outcome in released in September.
The government’s policy is restraint on budget cuts to protect jobs, services and economic growth. For this current financial year, spending is forecast to grow by 5.7 per cent and 1.6 per cent the following year.
According to the May budget: "Real growth in spending has remained low, at an average rate of 1.3 per cent from 2012-13 to 2016-17."
For this year, spending is forecast at $396.56 billion compared to an estimated $350.41 billion in 2012-13, an increase of $46.1 billion, according to the August economic statement.
So where does the $3 billion a week blowout come from?
The government always planned on a budget deficit. The surprise is that it will be bigger than forecast less than three months ago. The August economic statement recast the deficit for 2013-14 at $30.1 billion, up from the May Budget number of $18 billion.
And since it’s been 10 or 11 weeks since the May Budget was announced, does that mean $3 billion a week has been added to the forecast deficit?
Not quite. The re-forecast deficit is over one year and is now expected to be $12 billion higher.
Even if you take this to mean the change between the May budget and the August economic statement, it still only comes to about $1.2 billion per week.
We asked Abbott’s office and they referred us to the Liberal Party which replied that the $3 billion per week is the average weekly deterioration of the budget since it was brought down in May.
Cameron Hill of the Liberal Party says the cumulative deterioration totals $33 billion from the time the budget was brought down to the time of the government’s economic update 11 weeks later. This is based on the budget numbers which covers the forward estimates period.
"It’s a deterioration in expected revenue receipts, which the spending side of the budget is based on, hence the blowouts in the deficits," he said
But its worse than that. Forecast government spending has climbed $8 billion at the same time.
The changed forecast flows from automatic increases spending of the kind that happen without any specific government decisions as the economic outlook worsens. Spending more on unemployment benefits is one of them.
Add the two sides of the coin together -- $33 billion and $8 billion -- and you get $41 billion, a deterioration in the budget position of $3.7 billion per week.
Add in the $8 billion of government saving measures in the minibudget, as you should, and you’re back to a deterioration of $33 billion, or $3 bn a week.
But it’s a forecast number across four years, not 3 months.
Over the forward estimates, the next four years, revenue has been downgraded $33 billion. This gives a change in forecasting of about $3 billion a week between the May budget and the economic statement.
This doesn’t mean $3 billion per week was lost in lost revenue each week. The estimate is $33 billion over four years. The number comes from dividing the lost revenue by the weeks between the first and second forecast.
Over the next four years the deterioration amounts to $160 million per week - unless the forecasts deteriorate further, or improve.
Chris Caton, Chief Economist at BT Financial Group, says it’s correct to say the four-year sum has increased by $33 billion in the past three months
"However, it is just silly to typify this as blowing out by $3 billion a week. First, it’s a four year-total, not for a single year. Second, it is unlikely that such deterioration will continue."
Caton says the difference between the underlying cash balance now and at Budget time is about $33.5 billion, while the loss of receipts comes to $33.3 billion.
"This highlights the point that it’s the economy (and perhaps poor revenue forecasting) rather than a spending blowout that is responsible."
And the final point is can you blame Kevin Rudd for things like falling commodity prices and the slow down in China.
You can’t let the government completely off the hook. But you can’t blame any government -- Liberal or Labor – for external factors.
We know we’re in an election campaign where people say all sorts of things. And the Liberals are right to go as hard as they can.
The Coalition has been vigorously pursuing the ALP government on its fiscal record, criticising forecasting, the mounting debt and the growing deficit. In this instance Abbott has sought to link a "spend-a-thon" to the growing deficit, the responsibility for which sits on Rudd’s shoulders.
The budget papers show it is revenue, and its continuing to fall, which has been the cause of the growing deficit.
Additionally, PolitiFact Australia has written about blame/credit before. In this instance Abbott places the blame for economic woes on the Rudd when governments just don’t have 100 per cent of influence on economies.
External factors, such as falling commodity prices, trading partners buying fewer shiploads of ore and the global economy, all play a major role.
Abbott has linked a falling revenue number to a claim on spending when a comparison should be spending to spending. The more precise statement would be: the government’s revenue forecast for the next four years has changed by $3 billion per week between the May budget and the August economic statement.
There's no argument about that actual number. But the deterioration in the budget is over four years not 11 weeks. The budget isn’t actually blowing out $3 billion, week after week.
We rate this as Mostly False.
Published: Wednesday, August 7, 2013 at 7:06 p.m.
Tony Abbott, press conference, Parliament House, August 4, 2013
Economic Statement, August, 2013
2013-14 Budget Papers, May 14, 2013
Joe Hockey, door stop interview, August 2, 2013
Email exchange with Chris Caton, chief economist BT Financial, August 6, 2013
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