Swan swallows his words as forecasts fall short
Making iron-clad promises about future events can be a dangerous thing - just ask Wayne Swan.
He must still be kicking himself for saying in 2010 the government would deliver a surplus "come hell or high water" this financial year. We all know how this has ended up - with a $19.4 billion deficit.
What's more, the latest budget said we would have deficits for another two years, not returning to a balanced budget until 2015-16.
Swan's political opponents and critics are having a ball contrasting the string of surpluses delivered earlier last decade with the recent run of red ink.
But as will probably become clear if the Coalition wins government this year, it's too simplistic to only blame the current government for the shape of the budget.
The more complex truth is that Treasury bureaucrats have often got their budget revenue forecasts wrong, and this has had a huge influence on the budget.
The mention of forecasts is enough to make many people nod off, but think of it this way. Just as your household finances would be in trouble if you repeatedly underestimated how much you would be paid, so is the government's budget.
Since May last year, when Swan still expected a surplus, Treasury has downgraded its estimates of how much tax revenue it would raise in 2012-13 by $17 billion. This is the main reason for the deficit. But how could revenue be downgraded so sharply?
A big reason is weakness in company taxes. Many businesses just aren't making as much money as the government had thought.
After a big fall in commodity prices, the miners aren't raking it in like they were, while many others are suffering under the high dollar. As a result, company taxes were $5 billion lower than expected.
Another reason is lower-than-expected takings from capital gains tax.
With the housing market still quiet for much of the year, and many still wary about the sharemarket, it was almost $2 billion lower.
Excuses, excuses, you may say. But in fact, Treasury's revenue forecasts have often failed to hit the bullseye. Predicting how an entire economy will fare isn't easy. In the past, however, it underestimated how much money would come in the door.
As the graph shows, until the global financial crisis, budgets received a hefty boost from higher-than-expected revenue. It meant that on budget night, the Treasurer was in the happy position of having more money to play with than he was banking on.
Since the GFC, things have been moving in the opposite direction. In total, expected tax receipts have been written down by $170 billion.
This has all made Swan's job tougher, but he will be ruing making that surplus promise in the first place.