Expect a budget full of transparent fudging

There is just as much massaging of the numbers in Joe Hockey’s recent comments as in any of the budgets that Labor claimed were a 'pathway to surplus'.

Is the Abbott government very brave, very stupid, or just completely sure that it’s got the measure of public opinion as it heads towards a historic cost-cutting budget?

Surely the leadership team must wonder what might happen after the announcement on Thursday of the Commission of Audit’s proposals for spending cuts, and the budget that will incorporate some of those cuts a fortnight later. 

The worst case scenario (at least one hopes it's the worst) came with the Howard budget cuts in 1996, as Peter Costello’s memoirs record:

"The secretary of the ACTU, Bill Kelty, had promised before the 1996 election that he would give the government 'the full symphony'. The union movement organised a huge protest outside Parliament House on the day before the budget.

"Kim Beazley, the Labor leader, and Cheryl Kernot, the Democrats leader ... whipped the crowd into a frenzy over the unemployment the budget would cause and the recession it would bring on.

"Some of the trade union militants stormed Parliament House. The security guards and a small contingent of police were unable to block them ... The mob smashed down the doors and began running through the building. Cut by the glass on the doors they had smashed, they left trails of blood on the floor.

"The bodyguards assigned to the Prime Minister took me out of the Cabinet room and locked me in my office. After several hours, when the rioters finally left, we were given the all clear."

Scary stuff, and nobody wants to see such scenes repeated (except perhaps left-wing poets, for whom the imagery of the people’s blood on the floor of the people’s house is just too exquisite). 

But these are different times and one prominent union figure, who did not wish to be named, said that many had learned their lesson about how constructive such civil disobedience is. Nothing of the same scale or ferocity is expected.

In Costello’s words, "the riot backfired on the Labor Party and the ACTU". In an era when balaclava-wearing unionists ran through Melbourne offices with baseball bats, and pitched battles were fought on the waterfront, public opinion leaned towards Howard and Costello’s position enough for them to win four terms of government. 

But should unions and the public be more or less angry with the suggested cuts we’ll see this week? 

The shock of Peter Costello’s first budget was part of the problem. Whereas the Abbott team has been softening up the public for cuts for months -- if not years -- before the last election, the Howard government won office thinking it would have a small surplus (as promised by Labor Treasurer Ralph Willis) or, at worst, a small deficit. 

What they got was a bottom line $9 billion worse than expected -- that was, for the time, a very large deficit. 

The problem was that Costello was forced to spend most of his first few months working out how to cut that surprise deficit, and not enough time massaging public opinion -- hence the large protests and riots. 

But this time things are very different. One of Costello’s abiding reforms was the creation of a set of rules governing budgets that both major parties have adopted. Whereas once mid-year updates to budgets were rare, and randomly timed, Costello set up a formal process for full scale mid-year fiscal and economic outlook statements.

To make things better still, the Howard government legislated the Charter of Budget Honesty, which among other things set up the Parliamentary Budget Office that allows both side of politics to have policies independently costed -- a process temporarily trashed at the 2010 election by none other than Joe Hockey.

But wait, there’s more.

Costello knew that both sides of politics can influence Treasury to skew numbers one way or the other in the budget and MYEFO statements, and so he set up a process for Treasury and Finance to give their own independent estimates of the state of federal finances just before each election – the Pre-election Economic and Fiscal Outlook.

Given all that background, the thing that stands out most in the current context is the amount of "transparent fudging" in play. 

The 2013-14 Budget predicted a budget deficit of $25.4 billion; the PEFO took account of tanking revenue to predict a deficit of $30bn; and MYEFO, after a bit of extra spending, Labor’s blocking of some savings measures, and Hockey’s overturning of the scrapping of some tax-concessions, predicted a deficit of $47bn. 

Much as Hockey has done the usual budget "scream" over what Labor "hid" in the budget, any legitimate hiding has taken place in the budget forecast out-years -- the first of which will be accounted for in Hockey’s first budget on May 13.

That is, for any crowds that might gather out front of Parliament House this week or in budget week, the real numbers are there for all to see. There are no real surprises at all, thanks to Peter Costello, but some transparent and heavy massaging thanks to Joe Hockey.

In the words of Peter van Onselen of The Australian, "This fraud (there is no other word for it) is no more virtuous than the repeated fraudulent budgets Wayne Swan handed down claiming a ‘pathway to surplus’, predicated on manipulated figures and fudged accounting."

Despite all of Costello’s transparency reforms, people have a right to be shocked and angry. One can only hope they express those emotions peacefully.