EYE-BALL’s Guru on – The Wayne Swan 2013-14 Federal Budget – Special EYE-BALL Guru Report – The Economic Triggers Part 2.3 –
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– 28th May – The Wayne Swan 2013-14 Federal Budget – A Special EYE-BALL Guru Report – The Economic Triggers Part 2.2 –
– 27th May – The Wayne Swan 2013-14 Federal Budget – A Special EYE-BALL Guru Report – The Economic Triggers Part 2.1 –
– 18th May – The Wayne Swan 2013-14 Federal Budget – A Special EYE-BALL Guru Report – Part 1 –
– 13th May – Wayne Swan’s “Treasury Mistakes” – The Evidence of Incompetence – a Ponzi expert in the making.
– 10th May – Wayne Swan’s “Treasury Mistakes” – A Follow-Up –
– 29th Apr – Wayne Swan’s “Treasury Mistakes” – Heads must roll – Swan and Bradbury must accept responsibility’ –
– 23rd Apr – Wayne Swan’s – “Investment pipeline” – disappearing before his eyes – where does he go for his next ‘bunny excuse’ –
– 21st Apr – Wayne Swan’s legitimacy – He Says … ‘high A$ causes $7.5b hole since Oct ’12’ – He’s a unique type of idiot –
– 14th Apr – The Debt Clock ticks … Tic Toc … – Gillard just spent another $3,000 – counting the real cost of this ALP Disaster –
– 5th Apr – Superannuation 2013-14 – the Government’s new Slush Fund – Proposed Changes show SWAN and SHORTEN’s stupidity –
– 3rd Apr – Government not happy about its tax collect – Claims Tax Minimisation deserves ‘Naming and Shaming’ –
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– The Wayne Swan 2013-14 Federal Budget –
– A Special EYE-BALL Guru Report –
– The Economic Triggers Part 2.3 –
| Author: EYE-BALL Guru | 28th May 2013 |
|Links to previous posts in this series about – “The Wayne Swan 2013-14 Federal Budget” – A Special EYE-BALL Guru Report:
Chapter list in this Post:
The economic triggers talked about in this post form the pillars of any budget process – Government or Private Sector.
As sure as night follows day and the sun shines, budgets will always be the foundations from whence all economic prosperity flows. And so it is with bad budgets …
Researches and Budget framers can only use the evidence of trends from past performances. It is a case of having one eye focused on the future looking for bumps and freeways, half-an-eye on the now making sure that the forecasts are on track, and the other half-an-eye looking at the past looking for trends that might guide you to better decisions for the now and future.
Notes on the Source data:
This Economic Trigger research is an extensive extraction of Swan Budget ‘forecasts’ measured against ‘actual results’.
A lot of the research information comes from the Federal Budgets on-line source. Links to each Year’s Budget – www.budget.gov.au – for each of the forecast periods are provided below, with a separate link to display an Image file of the Budget forecast summary:
Analysis of the extracted data can only question Treasury’s modelling outcomes. Treasury consistently failed to predict the excess ‘revenues’ of the Howard era, and now they have overestimated ‘revenues’ and underestimated ‘expenditures’ all during the Rudd/Gillard years.
Historical Budget Outcomes 1996-2012:
The variance in Budget result – i.e. ‘actuals’, verses the Budget ‘forecasts’ since 1996 is plotted in the Chart below.
The Table at right is the data used in the previous chart.
The ‘Revenue’ variances of 2011 [12.94%] and 2012 [11.24%] appear well out of range with other ‘Revenue’ results – except for the 1999 Asian crisis where Costello saw revenue and expenditures actuals both come in at a bit over -11%.
The ‘Expense’ variance numbers up to 2007-08 show plus and minus results ranging from +6.3% to -4.26%.
What is notable is the ‘Expense’ average of the Howard years is -1.87%. By comparison the Rudd/Gillard tenure has ‘Expense’ variances averaging 3.24%
The ‘Revenue’ averaged for the Howard years is -0.41%, as opposed to the Rudd/Gillard years at -5.56%.
Without doubt the Treasury modelling under the Swan era has increased its error ranking by a factor of 498% – i.e. sum of Swan variances [-8.9%] / sum of Costello variances [-1.79%].
The harsh reality is the raw numbers for the Costello tenure accounted for a cumulative Budget result amounting to A$53 billion in surpluses, and the Swan results are A$135 billion of deficits.
This bottom line result of these two numbers of $188 billion has cause. But if we are to believe Mr Swan’s excuses in the last few years it has been because of ‘revenue write-downs’. The Table and Chart prove that Mr Swan has a completely different reason for his budgetary errors, and they are not because Treasury Modelling is solely to blame.
The main triggers used to formulate the Federal Budget modelling are listed below –
[Each of the Triggers listed below have been rated – “TR” = Trigger Rating – and measures the indicator and its influence on economic and Budgetary outcomes – the ranking is out of 10. Links for each Trigger to Wikipedia, ABS, RBA, or other source as provided.]
The ‘triggers’ used in this research all feed to Revenues, Expenditures, Debt, and when considered in the modelling phase of the Budget process. The forecasts are influenced by Government decisions and choices made about existing and new policy’s. Ultimately the Government is responsible for the Budget errors – yet, as history shows there is never any real accountability for retrospective errors.
All budget integrity is contained within their forecasts and estimates, i.e. the probable, versus the improbable, versus the impossible. Mr Swan’s budget forecasts are mostly about the impossible.
If the Government wants an outcome that the modelling cannot come up with, how does a Government go about get the result it needs to fund the policies they want to implement?
It is not hard to draw an argument that PM Gillard had an agenda based on election promises in the 2010 election. The most famous being the ‘No Carbon Tax’ and the new ‘MRRT’.
Swans biggest forecast errors came in the 2010-11, and the 2011-12 budgets, and all on the revenue side. Swan’s claims that the budget result went into tailspin deficits based of revenue expectations not being met, has face value creditability.
But to accept this reasoning you have to believe that the revenue forecasts were reasonable and achievable to begin with. The Table summary above proves that the consistency of errors on both sides of the budget make Mr Swan’s revenue expectations in the budgetary ‘impossible’ category.
When a Government promises a Budget surplus as iron-clad and as far out as PM Gillard and Treasurer Swan did in the 2010-11 budget, what can they do when it comes to 2012-13 budget time and the expenditures are locked in and already spent?
When the new ‘MRRT’ and ‘Carbon Tax’ fail to deliver the expected forecasts revenues, and the political equation in admitting to a failed ‘budget surplus’ promise means an even more woeful poll response, the craven way out is to blame the Treasury modelling.
This Government has fudged the numbers and proving it will be no easy feat. Someone in Treasury knows what’s going on and has help.
Table 1: Economic Trigger Forecasts v Actuals.
[click Table to enlarge in a new browser window – previously displayed in Post – Part 2.2]
This Table at right as previously stated provides the ‘actuals’ versed ‘forecast’ numbers for the Economic Triggers used in the Budget modelling for all Federal Budgets, and most other public and private budgets as well.
Table 1’s set of numbers represent the most sensitive triggers, CPI, Un-employment, GDP, Terms of Trade, and Current Account.
The Federal Budget forward estimates over each of the next four years are derived from these numbers.
Mr Swan knows the Treasury Modelling is unique and not property held outside the public domain.
He knows to try and duplicate how Treasury modelling use each of the economic indicators in Budget forecasting is a fool’s errand.
So why do this research you might ask?
As a moral exercise or challenge for each and everyone of us, It is important if you see something wrong or bad happening and you can do something about it, expose it, or report the problem. Our integrity and moral compass is guided by Societies expectations and those who can make a difference should do so. Walking away is the same as agreeing to what is happening … and so it is when apathy becomes the problem.
This Nation needs is more fixers and doers, not charlatans and pretenders fudging their way with no experience or understanding of their portfolio construct and responsibilities.
When Swan delivered his 2013-14 budget estimates/forecasts 14th May 2013, do you think he went back and looked at his 2009, ’10, ’11, and ’12 estimates/forecasts, and compared the actual outcomes with the past forecasts?
Do you think he pondered just how bad his Treasury Modelling performs?
Indicators like ‘Nominal GDP’ have appeared in Swan’s budget papers, yet were not even a part of the forecast in the Budget papers under Costello in 2007-08.
Budget Revenues –
2008: Revenues: This was Swan’s first Budget and there may have been some expectation overflow from the Costello era the surpluses would just keep rolling in. The variances against expectations were significant – -6.4%, -13.1%, -13.9% and -7.8%.
2008 – Expenditures: The same with the Expenditures – the actuals exceeded the estimates by -11%, -9.2%, -7.1% and -11.4%. Add them together and the yearly estimates were, -17.4%, -22.3%, -21%, and -19.2%,
2009 – Revenues: The Revenue actuals hit close to target in 09-10, and 10-11, but had Costello type windfalls in 10-11, and 11-12.
2009 – Expenditures: As much as the revenues exceeded targets, the expenditures pretty much ran the other way for similar amounts. This budget was delivered in May ’09 after the worst of the GFC.
2010 – Revenues: The over-estimate errors returned for the Revenue. This was an Election budget and good forecasts were political capital.
2010 – Expenditures: Expenditures all over the place with over and under estimates of significant percentages recorded on the two completed years.
The cumulative sum of errors over the two completed years in percentage terms was 17.2% against forecasts. This was an Election budget and good forecasts were political capital.
2011 – Revenues: Only a single year of actuals are in – and again the forecasts were over-estimated.
2011 – Expenditures: The same happened with Expenditures and the result was almost identical. and Expenditures for error factors yields margins of error if applied to any family budget would cause weekly chaos.
Summary: 2008-09 was the GFC year and some budget estimate errors had to be expected for the forecasts made in the 2008-09 against actuals.
But by 2009-10 the currency had recovered, and China was buying our minerals as fast as we could ship them.
Australia had escaped the worst of the GFC yet the Rudd/Gillard and Swan teams continued with a spending spree that lasted well into 2011-12 budget cycle.
How Governments responded to the GFC was natural order in their want to protect what has been a way of life for western society for many decades.
Governments wanted to protect the corrupted Banking systems, the Corporate raiders, and the Government gravy ride.
Economic Triggers – Real and Nominal GDP:
The 2008-09 Budget predicted the following growth forecasts:
These forecasts when matched with the ‘actual’ numbers in each of the years passed yield the following outcomes:
… these variance numbers, i.e. +.03%, +1.55%, -1.0%, +0.4%, don’t mean a lot when taken in isolation as Treasury Head Dr Martin Parkinson spoke about in his Treasury response to criticism of the latest budget. See his speech here.
However – when the error factor multiplier is used to theorise about how a +1.55% becomes a 207% error, these variances impacts exponentially on CPI, revenues, expenditures, unemployment, interest rates, household consumption, and a host of other economic indicator outcomes.
Dr Parkinson’s flippant dismissal of the modelling errors is an indication of just how complacent the budget process has become. Another way to view the Treasury Departments modelling is to say that the numbers being produced cannot be trusted any more.
Good number increases for ‘GDP Growth’ and the ‘Terms of Trade’, as opposed to bad number increases in ‘Unemployment’ and ‘Current Account’, have the potential to produce ‘actuals’ that impact on all the other budget forecasts. For example the 2009-10 GDP forecasts were revised from the 2008-09 budget estimates as follows:
This analysis and the more to follow is complex and in a world with an attention span of a millisecond – this commentary means what to who?
To most people it’s ‘jack-shit’ … who in their right mind would do this type of research … well there are people who live for these sorts of equations and number extractions, and particularly so when they contain misrepresentations that allows a Government to perpetrate a continuing fraud on the Australian people.
Mr Swan has to take responsibility for his poor forecasts … he signs off on the budget numbers. Anything less diminishes his office and weakens Treasury creditability.
In the next Chapters more ‘Economic Triggers’ are examined.
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