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Blame game hides real reason for deficit difficulty

Ross Gittins

 Don't believe anything any politician on either side says about the mid-year budget update and the expected further deterioration in the budget deficit it reveals.

And don't let speculation about whether the government will or won't lose its AAA credit rating worry you.

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ScoMo's budget battle

The Treasurer has set a target for the first half of 2017 to get the budget back in the black as he continues to warn of economic challenges ahead.

These days, our credit rating is little more than something for the politicians to use to slag each other off. Its economic significance is long gone.

According to Treasurer Scott Morrison, the government's long and unsuccessful struggle to get the budget back to surplus is all Labor's fault, first because of the terrible mess it left when it lost office and second because of its refusal to support many government savings measures in the Senate.

According to Labor, the Coalition's been in office for more than three years, during which time things have got worse rather than better, and it has no one to blame but itself.

In truth, neither side is as bad as the other side claims, but each is more at fault than it is prepared to admit.

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It's true Labor left office with the budget in bad repair. It had two big new policies - the national disability insurance scheme and the Gonski schools funding scheme - for whose rapidly growing cost it had made quite inadequate provision.

But it is equally true that the Abbott government's first act was to make the budget worse by abandoning various taxes and tax savings measures it didn't agree with.

Morrison speaks at length about the government's efforts to "repair" the budget, but the truth is that, since the rejection of the government's first budget by the public and the Senate, it has made no further effort to improve the budget balance, either by net cuts in government spending or net tax increases.

When Morrison speaks about all the spending cuts he has succeeded in putting through, and all those Labor has helped to block, he hopes you won't realise that their purpose was merely to stop the government's new spending decisions from adding to total spending.

That is, he has limited himself to trying to stop government spending getting ever greater. He hasn't been trying to make it smaller.

It is true, of course, that Labor has blocked many of the government's proposed spending cuts.

But to imply, as Morrison and others argue, that Labor has a moral obligation to pass all the spending cuts the government proposes, is to absolve the government of any obligation to propose savings the Senate might regard as sharing the burden of budget repair fairly between the haves and have-nots.

In fairness, the further deterioration in the budget outlook revealed in the up-date arises almost wholly from slower than expected growth in tax collections, particularly the pathetically slow growth in wages, which is not of the government's making.

Labor refuses to accept this "excuse" as payback for the Coalition's refusal to accept Labor's "excuses" when similar revenue setbacks occurred while it was in office.

This is the point being missed in all the blame laying: the main reason successive governments have had so little success in reducing the deficit is the economy's weak rate of growth since the resources boom started busting in 2011.

Some may think the economy's continuing weakness should not inhibit the government's willingness to slash and burn. Not me.