Following up from my Age piece, in the same newspaper Peter Costello attacks the government describing the PM as a “Whitlamite in conservative clothing.” I haven’t seen the Monthly essay yet but in terms of what the government is actually doing, it is very fiscally conservative. How do I know? Well you have to distinguish between the components of the fiscal position that are structural or on-going and those that are cyclical. The latter include the drop in tax revenues that thanks to the extra progressivity we got into the tax system under Costello is much more cyclically — especially, the GST and income tax components. But they also include the various once-off payments and expenditures that were announced yesterday and last year. Take those away and the government is in a structural surplus — just as it was during the latter Costello years.
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This stands in contrast to the Whitlam era that included large on-going expenditures in social security, health and education that were long-term expenditure items only some of which would be reduced in a recovery. Fraser kept much of this going and it was not until Hawke and Keating that a government dealt with structural issues.
The budget moving into deficit, hopefully ahead of the numbers and automatically is what we actually want. Does Peter Costello really want to distance himself from advocating that type of fiscal management?