Leaving aside the politics, which may involve setting up an environment for the Commission of Audit to have a serious look at the structural deficit, three comparisons are interesting here: MYEFO, PEFO and the Coalition's costings of their election promises released on 5 September 2013.
Using fiscal balance, rather than underlying cash balance numbers, and dealing with the next 4 years, being the period of the forward estimates, the comparisons at a high level are as follows:
- The PEFO cumulative deficit for the 4 years was about $38 billion. The Coalition pre-election costings indicated that the adoption of Coalition policies would improve that position by about $9 billion over the 4 years.
- MYEFO predicts a cumulative deficit of about $107 billion. The difference between PEFO and MYEFO is about $69 billion of which about $58 billion relates to softening economic conditions and $11 billion relates to changes in policy.
- There is approximately a $20 billion difference between the pre-election costings released by the Coalition and the MYEFO costings of policy changes since PEFO.
These are all relatively large changes for a period of less than 6 months. That said, two things are clear. Firstly, we need to get out of the current malaise of continuing to talk down the economy, because by international standards, we are doing well. Secondly, we do need to address long-term issues with the structure of the budget. This will involve looking at both the expenditure and the revenue side.