If just before the last election, you had looked at the Budget forecasts under Labor policy settings and Coalition policy settings you would have seen a relatively similar picture for the projected position over the period to 2016-17.
The Pre-Election Economic and Fiscal Outlook (PEFO) 2013, costed by Treasury under Labor policy settings, predicted budget surpluses in the 2015-16 and 2016-17 years with an overall deficit for the 4 years of approximately $38 billion.
The Coalition had released its costings, undertaken by a number of specialists, which also predicted budget surpluses in the 2015-16 and 2016-17 years with an overall deficit for the 4 years of about $30 billion.
Four months later, in the Mid-year Economic and Fiscal Outlook 2013-14 costed by Treasury, the picture looked decidedly different. The overall deficit was predicted to be approximately $107 billion for the 4 year period.
The difference of $77 billion lies in “Change in economic conditions and other parameters”. While this includes Paid Parental Leave and company tax rate policy changes which were too uncertain for Treasury to cost, the change is mostly based on different economic assumptions.
It is clear that the changes in the world economy between September and December of last year were not dramatic. What has happened is that there has been a move from the ’optimistic’ to the ’pessimistic’ side of the spectrum of reasonable inputs into the Treasury modelling. That would appear to be prudent from a Government and Treasury perspective. The important point is to understand what is happening and put this in perspective.