The surplus that never was (part3)

This note explains in a bit more depth the measures commonly used to describe a government’s performance, what they imply and what they hide.

The measures are:

·       Net operating balance NOB.

·       Underlying NOB.

·       Fiscal balance.

·       Cash surplus/(deficit).

The surplus that never was (part 2)

“We have delivered on our commitment to fix the Budget” were the words of Treasurer Gutwein when handing down the government’s 2018/19 budget.

The Treasurer’s surplus fetish has obscured the reality that the 2018/19 budget outlined spending far in excess of receipts over the four-year period of the budget and the forward estimates.

This note outlines in more detail the actual cash position of the government before and after the Revised Estimates Report described in the last blog.

The surplus that never was

The Treasurer’s Revised Estimates Report for 2018/19 released on Wednesday 30^th January reveals we are on the brink of a disaster.

The Treasurer still says otherwise. “(W)e will remain in surplus this year and across the forward estimates”, according to his media release.

How can the government be running surpluses if its net debt position worsens by $1.2 billion over the forward estimates? That’s because they’re not real surpluses. The Treasurer is not entitled to describe his bottom line as a surplus, because that term implies a cash surplus. Most people think the government is running cash surpluses. The reality is the exact opposite. For example, in the current year, the government will spend $522 million more than it will receive.

This is not a temporary blip caused by the Hobart hospital. Even after Revised Estimate changes, spending on the rebuild will only be $210 million this year (and $80 million in 2019/20 to complete the job).

In the next year or two the government will finance its excess spending by internal borrowings. In three years’ time however the cupboard will be completely bare. Even the $270 million that the government has supposedly set aside to cover insurance (the government is a self-insurer) will be gone.