So the news is in. The Alliance has brought down a budget that is only $425M in the red this year. Looking at the figures it is pretty easy to see where things went wrong. They budgeted last year to end up $283M in the red; things just got worse from there.
Budgeting for a government need not be a hard thing, need not be dependant on the vagaries of treasury sucking its finger and lifting it to the wind and hoping for a lift in revenue. There is no need to project the next year, simply to limit spending in the year ahead to the revenue brought in in the year past.
So last years budget should have been $4594M, and guess what – actual revenue this year would have left us with a few million in the bank. Sure, this is simplistic and ignores all the second order effects that happen when you trim back. But all of that washes out after a couple years.
This mechanism gives teeth to the line that both major party’s feed everyone about ‘balanced budgets over the medium term’. If you maintain this, that will occur, regardless of the actual outcomes – it’s prooffed against collapse, and tempered against surges. The one year lag also serves to temper economic changes, but just a little.
That’s the bottom line. The hard work, the hard choices, is above that, choosing what has to make way in order to fit in the budget. In a state budget, there are few easy cuts; I’ll look at that tomorrow.