EDITORIAL: Mr Swan dumps his surplus

TREASURER Wayne Swan’s forced backdown over Labor’s precious pledge to keep the budget in surplus should be a lesson to politicians of all stripes.
Nanjing Night Net

Economic targets are important things to set, and should not be lightly abandoned.

But they can’t be treated as holy writ. Economic circumstances are notoriously fluid and unpredictable, as any central banker, corporate CEO or small business operator will attest.

Governments make budgets, just like households and businesses do, and in each case it is always acknowledged that unforeseen events might force revisions.

Labor erred in letting its long-cherished ambition to return the federal budget to surplus in 2012-2013 take on the status of a rock-solid promise.

Tax receipts plummeted, the dollar soared and the mining boom slowed down, turning that rock-solid promise into a millstone around the government’s neck. Politically, it was damned if it broke its promise but was economically equally damned if it kept it.

It was an open secret that the appearance of an impending surplus only survived because of a variety of book-keeping manoeuvres in the budget.

It was also becoming clear that sticking to the script while bleeding revenue to the tune of billions of dollars was going to be the greater of two alternative evils.

Applying increased austerity to the economy in an uncertain climate of job losses, depressed demand and struggling industries could only be a recipe for disaster.

By contrast, the threat of being bludgeoned, yet again, by Tony Abbott’s oppositional chorus over ‘‘another broken promise’’ was a less fearsome prospect.

That chorus seems to be wearing thin with much of the voting public, and most people are probably too preoccupied with holiday plans to be bothered with another Coalition broadside.

Labor, not surprisingly, wants to claw back the stimulatory spending undertaken by Kevin Rudd when Australia was first hit by the global financial crisis.

Until recently that seemed achievable in the medium term, but it now appears possible that more, rather than less, economic stimulus – in the form of major infrastructure projects – might be the right prescription for Australia’s particular problems.

At the very least it should be hoped that the nation’s present crop of political leaders may have learned how dangerous it can be to make promises that depend entirely on circumstances beyond their control.