Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant or accept liability for the accuracy or usefulness of the transcripts. These are copied directly from the broadcaster's website.
Analysis of Budget outcome -

View in ParlViewView other Segments

ELEANOR HALL: Economics correspondent Stephen Long joins me in the studio now with his analysis of
the federal Budget outcome.

Stephen, how has the Government managed to achieve this better than expected budget bottom line.

STEPHEN LONG: Well, in technical terms, Eleanor, as Emma's report made clear, they have had higher
company tax receipts and they have had lower outlays because unemployment hasn't been as bad. There
hasn't been as much going on welfare but more broadly than that it is a combination of good
economic management and good luck.

We had timely and forceful monetary policy, big cuts to interest rates and the fiscal policy easing
with the economic stimulus, a strong banking system, China resurgence due to its economic stimulus.
So it has had a big economic rebound meant stronger than expected demand for Australian commodities
plus we've had rapid population growth in Australia.

Now, that may sound like a bad thing at a time when unemployment has been going up but it actually
means that there have been a whole lot more workers contributing to economic growth and that has
actually meant that, meant that things have looked a lot better.

If you actually look at it per capita, Australia doesn't appear as well though we've still done
better than countries overseas.

ELEANOR HALL: Now we heard what the Reserve Bank governor said yesterday but is there any danger
the Government debt will create problems down the track?

STEPHEN LONG: It is unlikely. If you look at the situation, we were going to have debt on
Treasury's projections, Eleanor, peaking at about 14 per cent of gross domestic product in 2014.
Now if present trends continue, we are not going to get anywhere near that and you compare that to
overseas.

The projections for the UK and the US was for their government debt to peak at about 80 per cent of
GDP. Now they are looking at being worse. In Japan you were looking at debt of about 140 per cent
of GDP. So ours, even on the previous projections, was miniscule compared to most advanced
economies, our public debt, and it is not going to get to that level unless we have another
economic shock and that will come from overseas and the whole world will be in deep schtuck and
we'll still look better.

And also bear in mind Eleanor, if you look back to previous years, we had a $60 billion revenue
surge in 2005/2006 as manna rained down from the sky with high company profits, huge tax receipts,
the mining boom, nearly as much the following year.

Now all we need is two or three years with huge demand for resources from China, big tax receipts
and you can knock this kind of debt on the head.

ELEANOR HALL: Now we heard in that report from Emma in Canberra that the Coalition is using this to
bolster their case for winding back the stimulus. Does this Budget outcome strengthen their
argument?

STEPHEN LONG: It is important to note that unemployment is still going up, still projected to go
up. We have still got work hours shrinking in the economy. There has been basically zero demand in
the economy over the past year.

If it wasn't for government money, the economy would have gone backwards at a rate of knots but if
the economy is performing stronger, there may be a case for a Plan B as the Coalition suggests but
guess what? We have a federal budget every year and there is always the possibility of mini-budgets
so if the economy is running too fast and too hot, there will be scope for the Government to put in
measures to wind things back.

But the broader politics here, Eleanor is that the Labor Government which always had economic
management as its Achilles' heel has, through a combination of good luck and timing, come out of
this looking like they have had the answers and the Coalition is using the conservative line which
may apply overseas of the fear of debt.

Now, that is not working at the moment. We'll see what happens when interest rates start going up
now though whether the Coalition gets back some of its political traction, but at the moment the
circumstances have worked to turn tables on the politics of who is the strongest economic manager.

ELEANOR HALL: Stephen Long, our economics correspondent, thank you.