Predicting the Unpredictable

In less than two months, every single article of every single major newspaper, hours and hours of tv coverage and water cooler chatter in the corridors of the public service will be dedicate to the Budget. Who were the winners? Who were the losers? You could almost write the stories now and with a little editing come the official announcements, it would probably make sense.

Yet, what will actually change for the majority of Australians? Most likely, not very much at all. Judging from past years, maybe a few dollars more in your pocket from a tax adjustment if you belong to a special group of society. Maybe a new infrastructure project in your local area (a detention centre?). Perhaps you might even be one of the very few people that lose something. A rise in the eligibility for a family tax benefit or a super contribution scheme?

My point is not that these things don’t matter. They definitely do. Just ask the any pensioner whose income was raised by the Rudd Government. However the budget has transformed into an annual event that defies the boundaries of common sense. It consumes the Government (and the higher echelons of the Public Service). It frames discussion for months to come. Yet it is all based on predictions and guesswork that can quickly come undone.

Let me preface this by saying this is not a Treasury bashing. It is simply a case that the task itself is too unpredictable. Treasury is expected to look into the future and forecast x amount of revenue and y amount of expenditure over a period of time when anything could happen. Despite the fact that the best minds in the public service work in Treasury, this is an impossible task. I am not an economist, or in any way trained to think about the future. Yet common sense and past results show this impossibility.

In May 2010, the Government budget was predicated on a $57.1 billion deficit. Four months later this figure had tumbled by $2.3 billion. Now, this might only be a shift of approx. 4% and I think we could all say to the Treasury, this is an impressive effort in forecasting. A trillion dollar economy and to get it within 4% after four months is a solid effort. Yet $2.3 BILLION dollars is a lot of money. It is more than the entire flood levy. The shifts and changes of the Australian economy moved to such an extent, in only a four month period, that the entire budget outlook mentality shifted from one of deficit doom and gloom to hold onto your hats, the economy is rocking.

This is the danger of the Budget as it is currently institutionalised. Wayne Swan will in all probability, deliver an extremely cautious fiscal outlook, a fusion of Government cutbacks and measures designed to drive growth and productivity. This will all be done with every single set of eyes focused on the 2012-13 net Government outlook (has there ever been such anticipation on a + or – ?). Social programs that help those in need will be cut, those that can create more wealth will be rewarded to stimulate further gains. All to make a set of numbers look a very particular way. A set of numbers fabricated on a very particular outlook of the world, at this very point in time.

So if you are like me, a sucker for politics despite the constant disappointment, you will watch the budget on a cold, pre-winter’s Canberra night. You will see the Government benches cheer. The opposition’s snarls and jeers. You will consume the twitter conversation, the instant reaction on ABCN24. Perhaps get swept up in it all and think change will be delivered on a scale which it has been promised. This will all be confirmed on Wednesday morning when professional political tragic’s confirm it in the papers.

Unfortunately, you will not read the most truthful piece about the whole process – the article which says no-one (not even Dennis Shanahan and Paul Kelly’s combined 93 years of Budget analysis) will know the state of the Government’s budget position of 2012-13 until it’s announced… in about September 2013.

Despite all this, Government moves on. Centrelink hands out what is required. Medicare provides health care. University students wake up seedy and go to class. Thousands of individuals will cross borders. Sometimes it’s a good thing to remind ourselves this is what changes peoples lives more than a milkshake adjustment to income tax brackets.

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