Contrary to all the hype, actual revenues in 2011-12 were not lower than those originally projected in the 2009-10 budget: thanks, in part, to larger than expected company tax collections, they were some $20bn higher. But spending also increased by around the same amount. It was this rise in outlays that mainly accounts for the large size of the 2011-12 black hole.
Nor was the spending blow-out due to factors beyond the government's control. Rather, fully two-thirds of it was the result of policy decisions - ie, decisions to increase spending on existing programs or launch new programs.
Let's put that spending in perspective. Swan committed the government to increase outlays by no more than 2 per cent a year in real terms until the budget returned to surplus. Had he stuck to that commitment since 2008-09, spending would be $46bn lower than it is today, wiping out the shortfall.
No surprise then that the deficits this government has accumulated in five years are now barely 1 per cent less, in inflation adjusted terms, than the sum of all deficits incurred in the 37 years from 1970 to 2007. Moreover, that Olympic record was achieved despite an economy that, thanks to the resource boom, was expanding at or even above its trend rate of growth, while the period from the 1970s to the mid-90s was marked by prolonged bouts of stagnation.
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