Saturday, November 13, 2010

Neither side will give Victoria's a deficit

JOHN Brumby and John Lenders want us to worry about the risk of a Baillieu government spending Victoria into the red. They say the Coalition has pledged a "staggering" $9.6 billion of new spending during the next four years, plunging the state into deficit.

They demand that the Liberals submit their policies to Treasury for costing as Tony Abbott conspicuously failed to do in the federal election. Without that, they warn, Victoria's AAA credit rating would be at risk. Phooey, say the Liberals. Ted Baillieu says it's just a game Labor is playing: "John Brumby is making this up as he goes along." They say they have given their policies to an accounting firm for costing, and will make them public before election day.

Treasury chimes in that at the start of the campaign Victoria's likely budget surpluses during the next four years were just $3.2 billion. Both sides' promises already exceed that.

Should we be worried? Is there a risk, as Brumby says, that a Baillieu government's spending would "blow the budget, threaten the AAA credit rating, and the only way you could keep it in surplus is through massive cuts to jobs, massive cuts to health, massive cuts to education and massive cuts to police and the public service"?

In a word: no. And there are two reasons why. First, Victoria has had 18 years of conservative fiscal management, under Labor and the Coalition alike. Do you really think either side would blow that by allowing its spending to exceed revenue?

Remember 1999? Labor took power promising to build a railway to Tullamarine, reopen passenger trains to Mildura, and build a railway to South Morang. In 2002 it pledged to build EastLink without any tolls. It broke all these promises rather than allow the state to go into deficit.

No one knows what the Coalition's promises this time would cost. But you can bet that if they exceed the revenue available, they will be cut to fit within it.

It's more likely that the Coalition will decide it doesn't really need to have two police patrolling every train station at night, or will junk other promises.

Second, Labor says its own promises will be paid for from the contingency fund buried in the budget to finance future spending promises. OK, but the Coalition would have access to the same fund to finance its promises. Treasury says there's $6.75 billion in the kitty.

So far Labor is out-spending the Coalition on hospitals and transport. The Coalition is out-spending it on police. Schools and tax cuts are still to come.