Saturday, June 2, 2012

Abbott is a Keynesian, after all

WITHIN weeks of a projected surplus being announced, the political argument has quickly turned back to the possibility of the budget falling back into deficit.

The government leapt onto Tony Abbott's comment on Nine's Today that he accepted "that in a crisis the so-called automatic stabilisers will operate to change the overall fiscal position".

Mr Abbott was commenting on Treasury secretary Martin Parkinson's evidence to a Senate committee this week when he indicated Treasury had been planning what it would do if European events generated a new crisis. Dr Parkinson said that while Australia's budget position was "incredibly healthy" by global standards, if the collapse of the euro leads to panic on financial markets, as in 2008, then "it's a different world all bets are off".

"We could if necessary go back into deficit to support activity," he said.

A spokesman for Treasurer Wayne Swan said that despite all his "bluster" about deficits, "Mr Abbott is talking about being in deficit himself. Of course it's no surprise to hear Mr Abbott talking about the Liberals going into deficit given the shadow treasurer has announced a $70 billion crater in the Liberals' budget that he needs to fill to achieve a surplus."

But Mr Abbott rejected the government's interpretation of his comment. "The Coalition's commitment is to have a budget surplus in year one and subsequently," his spokesman said, claiming that Mr Swan had refused to commit to delivering a surplus this financial year.

Asked by journalists whether it would be acceptable if the government, needing to adjust to international conditions, did not deliver a surplus, Mr Abbott said later: "It's never acceptable for governments to break solemn pledges.

"This government has been pledging for months now that no ifs, no buts, it will bring the budget back to surplus. Now, they shouldn't break that commitment.

"My fear is that they are preparing the ground to abandon that commitment and, let's face it, Wayne Swan has been much better at predicting a surplus than delivering one."

Mr Abbott would allow Mr Swan no leeway if there was another global economic crisis, or another natural disaster.

"There was no fine print to Wayne Swan's commitment," he said. "There was no escape clause. He made a solemn pledge again and again to Australians that the government would deliver a surplus . . . Now for him to break that commitment would be yet another sign that you just can't trust this government to manage our economy."