What Wayne “isn’t seeing”

Is the Federal government overlooiking a significant fact, when it does its budget sums?

Access Economics thinks so.

This matters, because Access economists are,  mainly,   former Treasury officials, who have  moved to the private sector.

They have plenty of know-how, when it comes to putting Federal budgets together.

This is not just another dry argument about economics.

If the Access economists are right, Wayne Swan might not be able to deliver what Labor has promised.

One way or another, that would affect every Australian man, woman and child.  Taxes, social security and government spending would all be hit.

What, then, is the argument all about?  And who is right?

In a paper just released, Access admits that Australia’s recovery is “well advanced” and that there is “further growth” ahead.

But it also warns  that there are “important headwinds.”

The doubts that Access raises are based firmly on its belief that not enough attention is being paid to the fact that the price of commodities, like iron ore and coal, can go down as well as up.  Traditionally, they say, markets fluctuate.

“We wouldn’t be doing our job as fiscal forecasters if we didn’t warn that relying on permanently higher commodity prices to fund the Australian budget in the longer term is an approach covered with caveats,” Access said.

“We need to stress this point – Australia’s fiscal finances, both short and long term, are hostage to the fate of commodity prices, and hence to China’s strength,” its  economists added.

They said they see the present black ink, in Australia’s trade books, turning to red within three to four years.

In terms of national financial stability, that’s not a particularly long time.

Access said China’s prosperity has already financed big tax cuts and spending increases in Australia.

Of course,  tax cuts or extra spending  will always make Treasury officials, past and present, very nervous.

So has that already compromised Australia’s budget calculations?

“To be honest,” Access says, “no-one really knows how healthy our budget is, or isn’t.”

That’s not a particularly comforting thought.

And it is not one that appeals to the Federal Treasurer.

As recently as last Sunday, Mr Swan boasted that Australia’s budgetary position is very strong, indeed, by current international standards.

And he expects that to continue.