Prime Minister Julia Gillard did some groundwork yesterday for the pain that will have to be inflicted with the upcoming budget. Where once there was a tiny surplus, now there is a large and widening deficit. Australia's business commentators quite simply tear into Gillard and the Labor government for the explanations offered as to why, after six years, they have read the tea leaves so badly.
The Australian's Judith Sloan starts off proceedings with some advice for the speech writers behind addresses like that of Gillard's yesterday to resist the temptation to show off, particularly in matters relating to economics and budgetary policy.
"Take the reference to Keynes changing his mind when the facts change. A more appropriate reference would have been to Keynes's firm advice that the tax share of GDP in a country should never exceed 25 per cent. Oops, we already have. And the notion that this government is somehow truly Keynesian because it believes in delivering fiscal surpluses on average over the economic cycle is obviously some kind of joke."
The Australian Financial Review's Jennifer Hewett is also in a laughing mood with her piece which points out perhaps the most obvious problem with Labor's suggested excuse for the budget deficit.
"Let’s get this straight. Julia Gillard’s rationale for her 'woe is us' budget update is a sudden collapse in revenue, particularly a big reduction in company tax. This is a rhetorical scam. The revenue for this financial year is up – not down – on last year. More than 7 per cent up, in fact. The thing that’s down in terms of revenue is Treasury’s credibility – again – given the perennially incorrect Treasury forecasts. But as usual, the government has spent up big on the basis of those overly optimistic Treasury figures."
She also points out that Treasurer Wayne Swan's predecessor, Peter Costello, had the opposite problem.
Fairfax's Tim Colebatch similarly observes the sins of the Howard government and goes a little softer on the Gillard government – or at least redirects his frustration to the discussion rather than the surplus/deficit target.
"So what does the data tell us? In the last eight years of the Howard government, cash revenues averaged 25.4 per cent of GDP while spending was 24.2 per cent. Result? Budget surpluses averaging 1.2 per cent of GDP. In 2012-13, revenue will be roughly 23.2 per cent of GDP. Underlying spending, after adjusting for last year's budget fiddles (which shifted $9 billion of spending into 2011-12), will be roughly 24.5 per cent of GDP. You do the sums. Which is the bigger problem: revenue or spending?"
Regardless, The Australian's economics editor David Uren observes to what extent the government is hiding behind macroeconomic forces.
"The prime minister's speech yesterday mentioned the 'economic cycle' seven times."
Meanwhile, The Australian Financial Review's economics editor Alan Mitchell points out that while the macroeconomic forces might be significant, it was the Gillard government that left spending at a peak when the commodity prices started to tank.
"It was her government’s fiscal planning that, at best, would have produced a run of small budget surpluses out to 2015-6. It was her choice to commit to spend almost every cent the government could lay its hands on, and to brush aside warnings of the need for serious reform of major government programs such as Medicare. And that is why the government’s fiscal strategy has failed."
Speaking of budgetary issues and taxation, Fairfax's Adele Ferguson reports that the government is on the brink of releasing a controversial study into the tax minimisation structures of the big tech companies like Google, Amazon and Apple.
Meanwhile in company news, Fairfax's Elizabeth Knight casts Telstra as the happy victim of the misfortune of others. Quite.
And finally, The Australian's John Durie looks at the price war between the Australian Securities Exchange and smaller rival Chi-X.