Of course they will argue that they’re doing much better than our friends in Europe or North America. But we’ve got to be in a good position relative to our own expectations of where we should be and we’re not at that level. We’re not where we should be.
One of the big problems with these fiscal crises is they kind of sneak up on you. In 2005/06 the Western countries were saying “We’re fine”, and that turned out not to be the case.
George Argyrous, senior lecturer at University of New South Wales
The attempt to achieve a surplus bought about its own undoing – as you try to achieve a surplus through austerity all you do is drive economic growth downwards, with the implication you’re more likely to get a deficit.
They’ve actually contributed to bringing about a deficit rather than achieving a surplus.
When you look at the dynamics of the effect of government spending on the operation of the economy, that’s what you get.
What the government should do is just accept that occasionally governments go into deficit and that’s a normal way of coping with slowdowns in growth.
Its like someone running up a hill – you have to breathe hard to get up the hill but you relax a bit when you’re coming down. The economy’s still running up a big hill.
If the politics of ditching the commitment to a surplus was ever going to be in place it’s now. Even business groups are lining up to say a surplus is not the way to go at the moment.
Most people would understand that occasionally you have to go into deficit to finance key spending. As long as the government does it wisely the same logic should apply.
It surprises me that the government hasn’t used this as a political tool in its favour to differentiate itself with conservative government’s in the States who are blindly pushing for surpluses at all costs.
I think that would have been a strong political message but they gave themselves no back door. It was all so predictable.
John Wanna, Sir John Bunting Chair of Public Administration at Australian National University
Unlike most macroeconomic commentators, I actually think it was worth the government aiming to bring a balanced budget in.
That has been a big control on their spending, and I think that has been important.
Having now realised that they’re going to have to relax that commitment is probably pragmatic, and probably expected. But I think having that target was important: because when governments don’t have targets, it makes them flail around a lot more.
That said, the target wasn’t achievable, mainly because of the lack of revenues coming in — not because of government spending.
Gregory Melleuish, associate professor, school of history and politics at University of Wollongong
I wonder whether it was all inevitable. At some stage they were going to have to bite the bullet on the fact that the surplus might not be achievable.
The Labor Party was trapped by the idea that it was going to achieve a surplus, using that as a measure of their economic credentials. So they invested an awful lot of political capital into that idea.
It’s interesting that Swan has said it’s not about the fact they’re spending too much, but about the fact that revenues have dropped off considerably. It’s interesting too the news that has come out that Queensland also had a considerable decline in its revenue. I suspect that this is the case across the states, which is why we’re hearing noises about things like wanting to increase the GST.
Labor were hoisted on their own petard because they made this into a symbol of their responsibility and if they can’t deliver, then this could be used to indicate they’re not economically responsible. To understand this you have to go back to the history of the Labor party. The Whitlam government was seen as financially irresponsible, so Hawke and Keating went out of their way to develop their economic credentials, and they did that very successfully.
