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Budget analysis with Stephen Long -

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Budget analysis with Stephen Long

Broadcast: 12/05/2009

Reporter: Tony Jones and Stephen Long

Lateline's economic correspondent Stephen Long discusses his take on the Budget.

Transcript

TONY JONES, PRESENTER: Let's hear from Lateline's economics correspondent Stephen Long.

Stephen, it was meant to be a Budget making tough decisions in tough times. Did it live up to that
at all?

STEPHEN LONG, ECONOMICS CORRESPONDENT: Well, certainly the times are tough, Tony. We're looking at
an unprecedented collapse in revenues - $210 billion written off in the forward estimates in terms
of revenue that was expected to be there. And in the current financial year, a collapse in revenues
that we haven't seen since the height of the Great Depression.

But was it a tough Budget in terms of the budget measures? Well, you'd have to say, "No, it
wasn't." Really, if this was a Robin Hood Budget, as it was pitched, hitting the rich, well, all
it's done is given the rich a small tweak. It hasn't put an arrow where it hurts. I'll give you an
example: the much-vaunted cuts to the private health insurance rebate; well, the family has to earn
close to a quarter of a million dollars before they lose all of that rebate. And most of the
changes in terms of the so-called "pain" for the top end will be more than offset by tax cuts. So,
it really wasn't as tough a Budget as it was billed.

TONY JONES: OK, in historical terms. We've just heard what Joe Hockey is saying. How big is the
debt this Government is about to enter into?

STEPHEN LONG: Well the deficit - let's start with that. At nearly five per cent of GDP, that's
bigger than the deficit that was reached during the height of the Whitlam years. And on the debt,
Tony, well, we're going to have debt as far out as the eye can see. There's a graph in the Treasury
papers that goes out 10 years and we're still seeing a substantial government debt then. It peaks
at $188 billion, but it continues out beyond a 10-year period. So, you could say that we will have
debt indefinitely. Now, at 13 per cent of GDP on the Treasury figures, it's small compared to
overseas countries, as is the deficit. But still in historical terms, it is highly significant, the
biggest we have seen in modern times.

TONY JONES: On paper, it does look sort of reasonable. Are they going to really be able to get the
Budget back into surplus by 2015?

STEPHEN LONG: Well, you'd have to say that it is unlikely. They'd have to beat the pattern that
we've seen in other recessions and you'd have to have more harsh cuts. And the other thing is ...

TONY JONES: Or growth, Stephen, because they're predicting growth figures of 4.5 per cent in a
couple of years.

STEPHEN LONG: Well that's right. Beyond trend growth within two years is what they're saying, which
is very optimistic. But all of this, of course, Tony, is predicated on the so-called "green shoots'
of economic recovery that we've heard a lot about around the world sprouting and actually being
sustained rather than withering on the vine. Now the big risk to the forecast is that we get
another round of global bank losses and negative feedback loop into the real economy, meaning that
we don't see the anticipated recovery on the global stage next year and that throws all this out
the window and then we will be having to look at more stimulus measures perhaps and certainly we
won't be getting the growth projections and certainly we will have more debt, more deficits and a
much worse time. And, you'd have to say, really, in the scheme of things, it does look pretty
optimistic.

TONY JONES: OK, Stephen, thank you very much for that.