Pollies will always spend your money

Treasurers always tell you the deficit will fall in the future, but tomorrow never seems to come.

NSW Treasurer Dominic Perrottet gives his 2021-22 budget media conference.

Politicians are the same the world over and certainly in every state and territory in Australia and in Canberra: if the money – your money – rolls in, they spend it.

As I foreshadowed last week, the NSW budget was the ‘Good’ in the ‘Good, the Bad and the Ugly’ trio running down the east coast. But that’s good only in relative terms.

In the mid-year budget update, NSW expected $90bn revenue in the fiscal year about to start. Now it expects to trouser around $4bn more at nearly $94bn.

Right, so that means a smaller budget deficit? Get out of here; didn’t you read my first par?

The forecast deficit is actually going to be bigger; in the update it was going to be just under $6bn, now it’s going to be $8.6bn.

Instead of spending $96bn in this coming year, NSW will now spend more than $102bn. Your money becomes our money and we generously spend it back to you – especially heading for an election.

The economy’s actually performing much better than was anticipated at the update – hence the higher revenue number – so there’s no economic justification for spending more.

It’s just because the politicians are what they are – and the election’s six months closer.

The second thing that never changes, is that the budget bottom line is “always getting better” – out there in the future some time.

Despite the bigger deficit forecast for 2021-22, the deficit will still immediately all-but evaporate the next year.

In the mid-year update it was going to drop to just $1.5bn in 2022-23; now it will plunge to just $1.8bn. And in both cases get back to a – barely a rounding error – small surplus in 2024-25.

This is because of the third thing that always appears in every budget from every treasurer, whether Labor or Coalition, state or federal: trust me, I’m not really a politician; cross my heart, I will put an iron clamp on future spending.

So spending will actually drop $4bn to $98bn in 2022-23 and then barely budge in 2023-24 and barely budge again in 2024-25.

So all the revenue rises year to year go into cutting the deficit. On paper, and now. But when the years actually come around……..?

Yes, it does all look much better than Victoria’s decidedly Ugly with a real capital-U numbers – and in the scale of fiscal believability, much more believable.

The two things that are all-too believable in the Vic fiscal numbers are that the budget will still be in deficit in 2024-25 – treasurer Tim Pallas says $2bn, it will be bigger – and that state debt will rocket over $150bn, 50 per cent bigger than the larger NSW’s projected $104bn.

I’d venture to suggest NSW is also getting more bang for the billions of infrastructure bucks that both states are spending chasing their population growth tails.

As for Queensland it also says its budget will be back in the black, just, by 2024-25; and its debt at $43bn will be much better than NSW’s on a population basis.

But that’s really the residual legacy of the ‘old’ Queensland which always delivered budget surpluses and no debt under Labor and LNP governments.

Just as every federal treasurer since 2007 ‘inherited’ – and then squandered, albeit at varying rates – Peter Costello’s legacy, so the same happened in Queensland with the similar legacy bequeathed by that state’s last conservative treasurer, Labor’s Keith De Lacy.

There’s a big issue bubbling away in all these state budgets: what will the virus and China do to the coming shares of the GST pot.

WA will have inadvertently shot itself in the fiscal foot by getting huge iron ore royalties; while the virus impact will play out big-time for the Good, the Bad and the Ugly budgets.

Originally published as Pollies will always spend your money