More Surplus Budget Baloney From the World's Best Treasurer


Let’s have a little look at what the world’s best treasurer, Wayne Swan, is babbling on about…

You probably know the news by now. That is, Mr Swan has ‘officially’ abandoned his budget surplus forecast for 2012/13. As far as we’re concerned, it’s not actually a big deal. What’s more galling is the way this government has completely mismanaged the process and/or lied about the budget’s progress.

Firstly, the whole surplus target thing was a political tool aimed at highlighting Labor’s economic credentials. Australia’s voters have long viewed Labor as a party with little spending discipline. So in an attempt to counter Liberal Party criticism, one of Labor’s strategies this year was to fight tooth and nail to deliver a budget surplus.

A major part of this strategy was to implement the mining super profits tax. Anyone with half a clue as to how markets work could have told you that the governments’ projections were completely unrealistic. The supposed budget surplus for 2012/13 was therefore never going to happen.

A few months ago, the Australian government realised this too. They obviously strategized about the best way to tell the public that the surplus was no longer there. So early this month, they leaked the news that they might have to abandon the surplus because of lower commodity prices and lower than expected tax revenues.

Then, our compliant media followed up for a few weeks saying how running a surplus was irresponsible economic management anyway and a move to a deficit was the right thing to do. Once that message filtered through into the community, the government struck…

Yesterday, a few days before Christmas when the public is more concerned about mince pies than budget details, Mr Swan fronted the cameras to tell everyone what they already knew. But in a spin that only a politician can provide, Mr Swan has this to say:

‘If the worst thing that people say is that we got the economics right again but fell short on the politics, I say, well so be it.

‘At the end of the day I don’t care about the political outcomes, I care about the economic outcomes.’

Is this guy for real?

Imagine you run a division of a large business. You forecast revenues one year out based on a number of supposedly well thought out assumptions. Those assumptions turn out to be vastly wrong. But because you’re expenditures are largely fixed, you can’t cut costs anywhere without endangering the whole business. So you make a loss for the year.

Instead of going into the board room, cap in hand, and breaking this news to the Chairman, you defiantly tell them it’s the right outcome for the business and that you got the economics right.

Good luck surviving that board room meeting with your job intact…

We know running a country and running a company are two different things with different objectives. Mainly, running a country involves spending other people’s money and only being accountable once every three years, at a time of your choosing. So it’s an unfair comparison.

But we still think Wayne Swan is a hypocritical fool. Following the largest boost to Australia’s terms of trade (and national incomes) IN HISTORY, the world’s best treasurer managed to deliver a deficit of 2.2% of GDP in 2009/10, a deficit of 4.3% of GDP in 2010/11, and a deficit of 4.1% of GDP in 2011/12.

Can you imagine what the deficits will be when times are really tough, as we think they’ll be next year? Oh, well, as long as Mr Swan gets the economics right…

This Christmas, ignore that buffoon Wayne Swan and all his fellow politicians the world over. Surround yourself with friends and family and enjoy it like it’s your last.

Merry Christmas, see you next year!


Greg Canavan

for The Daily Reckoning Australia 

From the Archives…

The Trade Deficit Dilemma That’s Alive and Well
14-12-12 – Greg Canavan

The Fed’s Poppycock Monetary Policy Targets the Unemployment Rate
13-12-12- Dan Denning

The Price of Risk in the Stock Market
12-12-12 – Murray Dawes

Recessions the World Over
11-12-12 – Dan Denning

A Victory Over the Zombies!
10-11-12 – Bill Bonner

Greg Canavan
Greg Canavan is the Managing Editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails. For more on Greg go here.

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4 Comments on "More Surplus Budget Baloney From the World's Best Treasurer"

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3 years 10 months ago

we got the economics right again but fell short on the politics,
war is peace,
freedom is slavery,
ignorance is strength

3 years 10 months ago
Time will prove Swan to be one of the worst treasurers Australia has ever had. He is a big spender in the traditional Labor way, indeed, one of their biggest ever the way he squanders money, however he has put us into debt to a degree where if a significant economic downturn occurred we would be in dire trouble to pay that debt. Late to the table in recognising a mining boom was dragging vast sums of money from Australia’s shores, he rashly decides to tax the ‘profits’, of all things, which soon proved to be another ham fisted approach,… Read more »
3 years 9 months ago

“What’s more galling is the way this government has completely mismanaged the process and/or lied about the budget’s progress.”

I am glad you feel that way Greg. Nothing is more important in our leaders than core values such as honesty and tolerance etc. Nobody should be surprised then that their governments WILL increasingly take advantage of them until they cannot stand it anymore. If people with power can lie and get away with it that easily how can we expect anything else.

3 years 9 months ago

I watched Wayne Swan deliver his speech on the budget surplus, it was like watching an episode of Sliders. There was a flash of blue light from the door leadinginto the Blue Room, (the interdimensional portal from a parallel universe) then Swannie strolled out and began talking about his surplus, and how we won’t have a surplus but he still had good economic policies and had the fundamentals right, et cetera.

World’s Greatest Tresurer? Here, no. Parallel universe, probably.

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