Treasury concedes fallibility
For the first time, Treasury has used the release of the Pre-election Economic and Fiscal Outlook - PEFO - to indicate how unreliable its predictions might be.PT13M51S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2rt4k 620 349 August 13, 2013
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Labor has stepped up its attack on the Coalition over its costings, arguing that now the Pre-Election Economic and Fiscal Outlook has been released, it must release detailed budget plans.
The Coalition has retaliated by arguing it will release its costings before election day on September 7.
On Tuesday, the Treasury and Finance department handed down its report on the state of the books, which is required within 10 days of the issue of the writs of a general election under the Charter of Budget Honesty.
PEFO forecast a deficit of $30.1 billion for 2013-14 and $24 billion for 2014-15 – the same figures as the federal government’s economic statement released earlier this month.
PEFO is slightly more optimistic about the forecast surplus in 2016-17 – the year Labor projects it will be back in black – putting the surplus at $4.2 billion as opposed to the $4 billion announced on August 2.
On Tuesday, Treasurer Chris Bowen called on the Coalition to immediately reveal its budget plans.
"From today ... the alibis end, the excuses end, nowhere to hide. Simply release your costings and how you intend to pay for your promises."
Speaking earlier on Tuesday from Townsville, Prime Minister Kevin Rudd said the PEFO document outlined the economic parameters that a Coalition government would inherit, so it was time for Opposition Leader Tony Abbott to release his own policy costings.
"It's D-Day for Mr Abbott when it comes to announcing his own budget bottom line," Mr Rudd said.
"Mr Abbott has been preparing for this election for three years."
Mr Rudd added: ’’Mr Abbott doesn’t have the guts to come clean on his $70 billion worth of cuts to jobs, health and education because he knows if the Australian people know his plans they’d be very worried about voting for him."
On Tuesday in Sydney, the Opposition Leader said the Coalition would be revealing exactly how much its policies cost and how it would pay for them, but he did not specify when.
He said the Coalition would start to announce significant savings after a "thorough consideration" of PEFO and the Coalition’s costings and savings would be "well known" before Australians went to the polls on September 7.
Shadow treasurer Joe Hockey said that the Coalition would "carefully"’ consider the information contained in the Treasury and Finance document.
He said that voters would have a ‘‘terrific" opportunity to look at the Coalition's numbers before election day.
Mr Hockey’s consideration of PEFO comes despite a controversial declaration last month that the Coalition would not rely on the document and would use a range of other sources instead, including the Parliamentary Budget Office and state government colleagues.
"What I can say emphatically is that our numbers will be more reliable than anything the government publishes because every single number the Labor Party publishes in government is dead set wrong," he said at the time.
On Tuesday, Mr Hockey said PEFO confirmed that growth would be slower under Labor and unemployment would be higher.
"Kevin Rudd can’t talk about his past and he can’t pay for his future," he said.
The PEFO report by Treasury secretary Martin Parkinson and Finance secretary David Tune has been issued as a public update on the state of the books. It updates estimates contained both in the May budget handed down by former treasurer Wayne Swan and the economic statement handed down by his successor, Mr Bowen.
The report finds that there is "uncertainty surrounding the global outlook" despite the fact that the Australian economy is expected to grow by 2.5 per cent in 2013-14 and 3 per cent in 2014-15.
It also states: "The economy’s transition to new sources of growth may not occur as smoothly as forecast."
The government released its own economic statement on August 2, two days before Mr Rudd went to the Governor-General to call the election, to avoid embarrassment during the campaign.
That economic statement, also based on latest forecasts by Treasury and Finance, wrote down expected revenue by $33 billion over four years, in a dramatic deterioration to projections soon after the May budget.
It revealed that the deficit this financial year would be much higher than the $18 billion forecast in May, while economic growth and unemployment forecasts had worsened.
The major economic parameters remain unchanged between the economic statement and PEFO.
The unemployment rate is also unchanged from the recent forecast - 6.25 per cent for the next two financial years before dropping to 5 per cent in 2015-16 and 2016-17.
PEFO says there are both international and domestic risks to the outlook, noting that the crisis in the euro area remains "unresolved" and points to concerns about US monetary policy and developments in China and Japan.
There is also a risk that the anticipated fall in resources investment could be "sharper" than expected, the report finds.
PEFO was handed down after The West Australian newspaper reported Liberal MP Don Randall has suggested that the Coalition might break some of its policy promises if it won government and saw the state of the books.
"Governments after elections quite often find themselves in difficult circumstances and I suspect that should we be the government and we see the state of the books, there’s going to be a bit of that sort of talk from the Coalition because governments do do that," Mr Randall said.
Mr Abbott said on Tuesday that he had been trying to call Mr Randall about his remarks.
"He knows what he said was wrong. I will keep my commitments. We will do exactly what we say we will do," he said.
Mr Abbott has repeatedly rejected claims he needs to find $70 billion worth of cuts, saying Coalition costings would be released before voters cast their ballots.
"We will carefully study that [PEFO], we will have more to say about savings quite soon and you will have our full fiscal statement in good time before the next election," Mr Abbott said in Melbourne on Monday.
Boat arrivals forecast up
PEFO also revises up the assumed arrival rate of boat arrivals since the May budget.
In 2013-14, 15,600 people are now expected, up from 13,200 forecast in May.
Treasury and Finance explain that PEFO retains the assumption that 1100 people will arrive per month but has updated the figure to account for the impact of arrivals since the budget and revised estimates of the number of people being placed on bridging visas.
The assumptions for the following three years are also higher.
Despite Labor's hardline Papua New Guinea plan announced last month, PEFO says that retaining the arrival assumption of 1100 a month is "prudent".
Mr Bowen backed the decision not to reduce the boat arrivals forecasts, saying the government did the same with its economic statement released earlier this month.
"We are confident in the arrangements we’ve put in place," he said in Sydney.
‘‘The prudent thing to do is to keep these forecasts as they were in budget time."
Coalition immigration spokesman Scott Morrison seized upon the PEFO boat arrivals figures on Tuesday afternoon.
"When you think about the cost of Labor's border failures it is absolutely mind-numbing," he said.
With Daniel Hurst and AAP