Colebatch puts revenue and spending in perspective

Before we tackle the budget, let's clarify a few points

In the last eight years of the Howard government, cash revenues averaged 25.4 per cent of GDP while spending was 24.2 per cent. Result? Budget surpluses averaging 1.2 per cent of GDP.

In 2012-13, revenue will be roughly 23.2 per cent of GDP. Underlying spending, after adjusting for last year's budget fiddles (which shifted $9 billion of spending into 2011-12), will be roughly 24.5 per cent of GDP.

You do the sums. Which is the bigger problem: revenue or spending?

The gap was meant to close in 2012-13. Revenue was forecast to swell 11.8 per cent, mostly from company tax and the mining tax, while spending, thanks to the fiddles and ''efficiency dividends'', was meant to shrink 2 per cent. It hasn't worked out like that.

Spending in the eight months to February was up 1.8 per cent year on year, but Finance Minister Penny Wong insists it will end up on target. But revenue has risen only 4.5 per cent year on year. For the three months to February, tax revenue was 0.5 per cent less than it was a year earlier.

Why? We've been told again and again, but some don't want to hear. Mining companies, which have been doing well, have been quite legitimately reducing tax by writing off the record $285 billion they invested here over the past decade. And the mining tax was so poorly designed that it has raised virtually nothing, and might not for years.

Apart from the banks, the rest of the economy has not done well, mainly due to the overvalued dollar, so it's not paying that much tax. Company tax was meant to reap an extra $6 billion this year, but in the first eight months, its take rose just $381 million, less than 1 per cent.

But the government spends too much, you say. Well, all of us can think of areas where we think it should cut spending. Equally, we can all think of areas where it should spend more. The International Monetary Fund estimates that, excluding east Asian countries where welfare is left to the family, Australia already has the second lowest spending of any Western country, behind only Switzerland.

Noting changes in spending and revenue as a percentage of GDP puts the figures in a perspective that propagandist economists for the Coalition who infest The Australian and News Ltd (and spend their days at Catallaxy) would rather not talk about.  For them, it's all "but revenue has increased!" 

[Catallaxy has, incidentally, been just about completely taken over by conservative Catholics or wannabe Catholics who want to condemn abortion all day; complain about Labor politicians who are pro-choice (let's not fret about Liberal ones who are too - or Tony Abbott adopting the "legal, safe and rare" formula); and worry about how the Catholic Church is being persecuted on the sex abuse issue.    Oh, and Islamists - they are very, very worried about Islam.     Strangely, Sinclair Davidson seems to very sympathetic to anti-abortion calls himself - he has never objected to one particularly neurotic visitor linking continually to his own anti-abortion posters featuring graphic photos of aborted foetuses.  Davidson also complained about the sex abuse enquiry that has just started, and one poster made (and never retracted, despite his being shown how bizarrely wrong he was) the  ludicrous claim that more Labor politicians had been to jail for child sex abuse than Catholic clergy.   It's like the Tea Party (Traditionalist Catholic sub-branch) of Australia.   A weird place.]