17 May 2021
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Abbott's budget reply: is he really trapped?

Peter Switzer
22 May 2013

When the Treasurer let us know that the promised surplus of $1.5 billion ended up being a $19.4 billion deficit, and this will be followed up by an $18 billion deficit next year, you couldn’t help but think, why would I take seriously any other number this guy will utter?

Sure, forecasting is difficult but lots of economists, including yours truly, said Mr. Swan had Buckley’s chance of getting a growth number of 3.25 per cent this financial year, and without that you could forget about a surplus.

Swan seeking surplus was irrational

More to the point, most economists warned him a surplus was unnecessary and in fact, trying to get one would hurt growth and knock out the chances of getting a surplus.
To the non-economist, this is a mystery, wrapped in a riddle inside an economic enigma. To anyone who understands economics, it’s Economics 101.

The good in Labor’s plan

OK, let’s ignore Labor’s economic plan that’s bereft of any stimulation to business investment in the short-term, which is crazy considering business confidence is shot — all surveys tell us that. Let’s concentrate on the good stuff.

Disability care, Gonski education reforms and infrastructure spending are all good but it would be better if we were more sure about their funding in the future. Let’s keep our fingers crossed that a new Government helps confidence and the economy grows and the money shows up.

Booby trap for Abbott?

Finally, what of the so-called trap Labor has created for Tony Abbott, making him support Disability Care and Gonski.

This makes his Thursday reply the most interesting in my lifetime, as it will set the tone for the upcoming election.

But I can’t see a trap, as all Mr. Abbott has to say is, “I support both the Disability Care and Gonski proposals but we will do it and fund it differently", just like his approach to NBN.

If he says he can fund it better and smarter than Labor, who of sound mind would seriously question it, given Mr. Swan’s track record with money! 

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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