Australia’s treasurer Wayne Swan has tonight handed down his fifth budget since the Labor Party came to power in 2007. Of particular interest in the budget is the estimated deficit for the current financial year.
In the 2011/12 budget, Swan estimated that the deficit for the financial year would be $22 billion. When the Mid-Year Economic and Fiscal Outlook was released at the end of 2011, that deficit blew out to $37 billion with the economic situation in Europe and natural disasters in Queensland being blamed for the worsening fiscal position. In the Outlook, it was said that:
The forecast deficit in 2011-12 is larger than expected at Budget, with around two-thirds of the increase reflecting variations to receipts and payments as distinct from policy decisions.
With $10 billion of the deficit blow-out coming from incorrect estimates, what exactly was the other $5 billion spent on?
Now we are almost at the end of the financial year, another $7 billion has been wiped off the budget bottom line. Where did this go? Swan can’t blame the situation in Europe which has remained stable in the last six months. Swan can’t blame the Queensland floods which happened twelve months ago (and for which he introduced an extra levy to recoup costs).
With a $1.5 billion surplus predicted for 2012/13, one has to wonder whether or not Swan and Gillard can even deliver it. Only time will tell.