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Election '96: economist expresses cynicism about the election promises made by both major parties.

MONICA ATTARD: The Opposition has been making much today of Treasurer, Ralph Willis's refusal last night to rule out any new taxes if the Government wins the Federal election. In a TV debate with Peter Costello, Mr Willis refused to echo the Opposition's vow not to raise new taxes, although he did say that the overall tax burden wouldn't be increased. But today, economists around the country are sceptical that either man's promises can be kept unless they're prepared to take the razor to public spending. Curiously enough, in such a hard-fought campaign, although both sides have cast doubt on the others' promises, neither has been prepared to level accusations about using rubbery figures. Catherine Job explains why not.

CATHERINE JOB: Our politicians like to bemoan the sad but persistent growth in voter cynicism. Many are hurt to find their profession held in lower esteem than used car salesmen and they wonder why voters are so reluctant to believe their promises. Well, so far in this campaign, voters have every right to be cynical and to suspect that both sides of politics are trying to sell them a pup because it's true. For the last three days, Labor and the Coalition have been stumping the country, making promises they know there's every likelihood they'll be unable to keep. The great dirty secret of this campaign so far is the true size of the underling Budget deficit; in other words, how much money will be left in Treasury coffers at the end of the financial year for the new government to spend. It's a secret because Treasury hasn't released it. Instead, both Labor and the Coalition are making their promises based on a prediction made last May, a prediction that all the private sector analysts say has blown out by between $3 and $8 billion.

Back in March 1983, on the day after the election, the then brand new Labor Government got an awful shock. The Secretary of Treasury, John Stone, told his new boss, Paul Keating, that instead of the $6 billion Budget deficit announced by Coalition Treasurer, John Howard, a week before, the figure was in fact a disastrous $9.6 billion. While the new government was busy ditching all the campaign promises it can no longer afford to keep, they had the pleasure of blaming John Howard for not revealing, in the week before the election, what the real damage was, even though he was warned five days before that election of the approximate figure and was given the final tally the night before polling day. In fact, the Government seized every opportunity in the last 13 years to throw this economy with the truth back in John Howard's face.

Well, if Mr Howard becomes Prime Minister on 2 March, he'll probably have the chance to get his own back. In an almost exact re-run of 1983, we're likely to see a new Coalition Government express great shock to learn the underlying Budget deficit is in the order of billions, instead of the $200 million surplus. And they'll then have to decide which of their election promises can't be kept. If the Government gets back, the figure will be announced more in sorrow than in anger, but the situation will be the same. The election promises based on last May's estimate will not be affordable because those figures are out-of-date.

So why isn't Labor telling you that the Opposition won't be able to keep its promises, or the Coalition, that Labor's undertakings are unaffordable? Because it's a weapon that would strike at the heart of both parties' campaigns. Once the true size of the Budget deficit is revealed, both houses of policy cards come tumbling down. Economist, Chris Richardson from Access Economics, has estimated the underlying deficit at around $8 billion. More optimistic colleagues think it's about three. But he says no one, not the Government, nor the Opposition, can possibly believe the small surplus on which all their election promises are based.

Chris Richardson, is there any way that whichever side wins will be able to keep its promises so far?

CHRIS RICHARDSON: No, I don't think so. It's true, I'm at the pessimistic end. I'm saying there's an $8 billion hole in the Budget, but even the most optimistic of private sector forecasters are saying it's a $3 billion hole. That's a lot of money. Either whoever wins is going to have to cut spending more than they've admitted or they're going to have to raise taxes.

CATHERINE JOB: Well, you used to be with Treasury. Would they have calculated by now a more up-to-date figure?

CHRIS RICHARDSON: Yes. I'm sure that Treasury would have. It's only five months until the start of next financial year. Treasury's forward planning process would be well under way. I'm sure they have the numbers.

CATHERINE JOB: Why can't they release it?

CHRIS RICHARDSON: We're now in the caretaker period of government. The Treasurer can't ask them to, but I think if perhaps both parties, both major parties were to ask Treasury to do so, they'd certainly consider it.

CATHERINE JOB: So, do you think they should, both parties should get together and say, 'Let's have the real figure and we'll start from there'?

CHRIS RICHARDSON: I certainly think so. It's a chance for Treasury to be honest broker, the same as in New Zealand, the Fiscal Responsibility Act asks the New Zealand Treasury to do just that.

CATHERINE JOB: Do you think they will?

CHRIS RICHARDSON: No.

MONICA ATTARD: Chris Richardson of Access Economics, and that report from Catherine Job.