Labor has choked on a surplus of promises


Economically he was doing the right thing. Politically he was eating crow. Which is why it took Wayne Swan so long to do it.

Economists, government advisors and backbenchers have known for some time that, with growth slowing and revenue falling, keeping Labor's promise to return the budget to a skinny $1.1 billion surplus next year made no sense.

In fact it was likely to be counter-productive to keep cutting government spending to meet what was a purely political pledge.

But this was no ordinary promise. It was a promise the Treasurer said back in 2010 would be kept ''come hell or high water''. It was a promise he said in February was ''nailed to the mast''. It was a promise that just in November Prime Minister Julia Gillard insisted the government was ''on track to deliver''. It was a promise the government itself had made a benchmark for economic responsibility. Which is why it was so difficult for it to drop, even when keeping it would have been economically irresponsible.

And it was in order to give substance to another political promise that the government got itself into the bind in the first place.

Remember how long it took then Prime Minister Kevin Rudd to utter the ''d'' (deficit) word in 2008, even as he was stimulating the economy to get through the global economic crisis. When Labor finally brought itself to say ''deficit'' it always prefaced the dirty word with ''temporary''. In the 2010 budget it defined temporary as three years hence - i.e. in next year's budget.

There were two fears driving Labor's reluctance - the fact that dropping the surplus promise would give the Coalition another stick with which to hit the Prime Minister's trustworthiness and truthfulness and the fact that both parties have allowed the very idea of deficits to become almost a taboo.

But in the end the consequences of keeping the promise became even worse, including as Wayne Swan said yesterday, for employment. He was not ''loosening the purse string'' he insisted, it was just irresponsible for him to cut spending any more.

With Julia Gillard on leave, the Treasurer had to eat crow by himself. But having been vindicated in their prediction that Labor would not return a surplus Tony Abbott and Joe Hockey appeared together to claim a significant political victory. The day was theirs.

''You just can't trust this government to manage the economy and you just can't trust this government to tell the truth,'' said Mr Abbott.

But having themselves promised to always deliver surpluses, having said a surplus next year is ''absolutely vital for the long term welfare of the Australian people'', when it comes to tally their election promises in the new year, in very same economic circumstances, the Coalition will face its own fiscal problems.

Prime Minister Julia Gillard and Treasurer Wayne Swan.

Prime Minister Julia Gillard and Treasurer Wayne Swan.


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