The wonders of Federal finances

Federal finances are a wonderful thing.

The Treasurer, Wayne Swan, has now admitted that the government’s recent deal with the miners will cost the Federal Treasury $7.5 billion.

But he says, too, that the surplus the government now expects to produce three years from now, at $3 billion, will be bigger than he the $2 billion surplus he “projected” when he delivered his May budget, just a few weeks ago.

Economists, of course, are fond of saying that economic forecasting was invented merely to make astrology look good.

That, of course, is a cop-out and we – at Private Briefing – never accept excuses like that, no matter how tempting they might be.

So how did Mr Swan do that trick.

The Treasurer, himself, admits that the figures can be hard to follow,

He told reporters that, in Canberra, shortly after he produced his latest “economic statement.”

“I do accept that the numbers have been hard to follow,” he said.

Essentially, though, the projected surplus was not merely protected, but actually increased, by revising commodity price estimates.

Mr Swan insisted that this was legitimate as commodity prices have, in fact, risen since the May budget was prepared.

The revisions mean that the government is now asserting that the Mineral Resources Rent Tax, which replaced the now scrapped Resources Super Profits Tax will raise more than originally expected.

The government is now expecting to collect $10.5 billion, from that new tax.

Cynics might see that as Mr Swan taking back, with his left hand, what he had apparently given away, with his right.

There are some surprises, thougb,  in the government’s latest economic statement.

One is a commitment to limit real spending growth to 2 per cent a year, if the government is returned in the now imminent election.

(Those who believe the government will go its full term should check the rate at which it has been making appointments to important committees and boards, over the past few days.  This development, which is common before elections, is known in the political trade as preparing to rule from the grave.  That is,  taking out a little insurance against losing the election).

Another development is the government’s virtual admission, after just a few weeks, that it probably won’t produce the economic growth, that it forecast, just a few weeks ago,

It has downgraded this financial year’s forecast growth from 3.25 to 3 per cent and next financial year’s from 4 to 3.75 per cent.

That’s not good news for the thousands of young Australians who will leave school, to enter the nation’s job market this year.

Growth of 4 per cent is needed, just to absorb each year’s school leavers.