Following on from the post on how re-distributive the Swan Treasury has been, I figured I’d take a look at the evolution of Commonwealth Treasury forecasts for Receipts and Payments (the data are collected from budget paper 1, statement 10 of the various budgets and appendix D of the 2012-13 MYEFO — this is a link to statement 10 in the 2012-13 budget, and this is a link to Appendix D in the 12-13 MYEFO).
So what’s been happening with expenditures? The above plot shows budget expenditures (AUDbn), with projections coloured according to the document in which they were published. You can see the expenditure bulge in 2008-09 (the ‘stimulus’), and the bring forward of spending into 2011-12. The latter seems like a bit of a joke now, as the goal was to reduce spending in the 2012-13 period, in an attempt to magic-up a surplus. What catches my eye is that spending in nominal terms rose sharply in 2008-09, and still has not returned to the prior trend.
As a proportion of GDP the story is not quite as stark — but you can still see the spending bulge. At 25.3% of GDP, payments in 2011-12 remained well above the ~24% (or so) level which is probably consistent with a balanced budget, however in part this was due to pulling payments into that year (and out of 2012-13).
The projection has been for payments to track back down below 24% over time, which is probably required to get the budget back into surplus — but actually achieving it is more difficult than projecting it (note: the budget 2009-10 Expenditure %GDP line is correct — the forecasts at the time were for a deep recession, so the ratio of expenditure to GDP was inflated).
On the revenue side, things have generally been better than feared in 2009-10, but not as good as hoped in 2010-11.
The monthly returns suggest there have been further downgrades here, so the next line will be a shade lower again.
As a share of GDP, receipts are particularly depressed. This is partly about the high AUD and partly about the decline in the terms of trade — which are working together to lower nominal GDP growth and hence tax receipts. This stuff is hard to forecast, but I do not think it is the surprise some are claiming.
This is something Treasury were warning about back in 2010 — that after taking out the terms of trade, the budget was in structural deficit, and would remain so for some time. The tide is going out, and it is exposing a structural deficit that has been there since the late Howard / Costello years, and that Rudd / Swan have made worse.