Hockey fails his own honesty test
Hockey professes hardly to believe a word of Wayne Swan's budget. It "lacks integrity" and he has "deep reservations about the numbers", which "at the very best are optimistic".
He claims not to lack faith in the work of the Treasury, only in the Treasurer. But he criticises various budget assumptions about how spending on certain items will change over the next four years (he seems terribly confident about the accuracy of his own crystal ball), implying Swan has imposed his own, implausible figures on the econocrats.
So what's he on about? Part of it is no doubt just an attempt to further destroy the credibility of the man who, in last year's budget, boasted it "delivers [note that word] a surplus this coming year, on time, as promised, and surpluses each year after that, strengthening over time". Oh dear.
Well, Hockey wouldn't be a pollie if he didn't exploit that golden opportunity to put in the boot. And he's right to cast doubt on the likelihood of a $6.6 billion surplus in four years' time - not because the government has got at Treasury and Finance but because no one, not even Hockey, can have any certainty about how the economy will unfold between now and then.
That's just common sense. It's the simple souls who take medium-term projections literally that Hockey should be wising up, not implying he can know the future better than Swan can, or that Treasury's forecasts would be right on the money were Swan not forcing them to be wrong.
There's no reason to believe a change of government would make any difference to the likelihood of budget forecasts proving off-beam because of unforeseen developments. The world will not suddenly become more stable or predictable on September 14.
But I think Hockey's motives in rubbishing the budget forecasts are more devious. He dribbles out the odd example of unpopular spending cuts but, since he doesn't know the budget's true position, he can't do more than that. He doesn't know how much he's got in the kitty to play with - or, rather, how big is the "true" deficit that will constrain the promises the Coalition will make. Get it? He claims the budget figures are politically tainted because this justifies him delaying publication of his costings until only about three weeks before election day - which is when we'll receive the PEFO, the pre-election economic and fiscal outlook, signed off not by Swan and Penny Wong, but by the secretaries of Treasury and Finance.
The "pee-foe", part of Peter Costello's charter of budget honesty, is a good idea gone wrong. It's purpose was to stop future incoming governments doing what Costello did in 1996 (and Paul Keating did in 1983): claiming to have uncovered a "budget black hole" left by their predecessors and using this as a excuse for a horror budget, in which cuts not mentioned in the campaign materialise and promises retrospectively declared to be "non-core" are broken.
That's fine, but successive oppositions have used it ever since as an excuse to leave revelation of their plans and costings to the last moment.
Trouble is, last week Treasury secretary Martin Parkinson (who said he'd been authorised by Finance secretary David Tune to speak also on his behalf) undercut Hockey's excuse, saying that had the PEFO been released at the same time as the budget, it would have said the same thing.
So if the PEFO differs from the budget it will be because of government policy decisions and developments in the economy, not because the econocrats are no longer being leaned on.
Note that, if he follows past practice, Swan is likely to publish an updated economic and fiscal outlook document just a week or two before the PEFO. Why? So he can take any policy measures need to prevent the econocrats' latest forecasts from comparing too badly with the budget.
Hockey says "we must return to stable, predictable and honest government to Australia". Well, if he can magically make the economy more stable and predictable, good luck to him. As for restoring honesty, it would be a good thing. But by using such a weak excuse to keep the electorate in the dark about his plans until the last moment, he's not off to a good start. The next honesty test will be whether his costings are checked by the Parliamentary Budget Office or by some back-street accountant who has certified only that the arithmetic's OK.
Twitter: @1RossGittins
Frequently Asked Questions about this Article…
Joe Hockey says Wayne Swan's budget "lacks integrity" and has "deep reservations about the numbers," arguing the medium‑term projections are overly optimistic. He stresses his mistrust is of the Treasurer's choices rather than Treasury's work, implying some budget assumptions may be politically motivated.
The article stresses that medium‑term forecasts are inherently uncertain — no one can be certain how the economy will unfold over several years. For example, Hockey casts doubt on a projected $6.6 billion surplus in four years' time, and the piece notes it's common sense to treat such multi‑year projections cautiously.
The PEFO is a pre‑election economic and fiscal outlook signed off by the secretaries of Treasury and Finance intended to provide independent figures ahead of an election. It matters because it can confirm or revise budget assumptions and helps the public judge the costings opponents publish late in a campaign.
According to the article, oppositions sometimes delay revealing costings to avoid early scrutiny and to use the PEFO as an excuse for late disclosure. Hockey has suggested waiting until about three weeks before election day, a practice the article says successive oppositions have used to keep plans in the dark until the last moment.
Martin Parkinson, speaking with the authority of Finance secretary David Tune, undercut Hockey's excuse by saying that if the PEFO had been released with the budget it would have said the same thing. The implication is any PEFO changes are likely due to policy decisions or economic developments, not because Treasury forecasts were being politically manipulated.
The article argues there is no reason to believe a change of government will make forecasts more accurate — the world won't suddenly become more stable on a specific date. Forecast errors are more likely to come from unforeseen economic developments than from which party is in power.
The PEFO is part of Peter Costello's 'charter of budget honesty', designed to stop incoming governments claiming a surprise 'budget black hole' left by predecessors. However, the article notes successive oppositions have used the PEFO as an excuse to delay revealing their own costings until late in the campaign.
The next 'honesty test' the article flags is whether costings are checked by an independent body like the Parliamentary Budget Office rather than just being certified by a private accountant. For everyday investors and voters, scrutiny by the PBO provides greater assurance that arithmetic and assumptions have been independently examined.
Call 1300 880 160
Start a chat
Schedule a call
