Mr Hockey – The bet is ON!
Despite Mr Hockey offering to bet “the contents of his pocket” that the Budget will not contain “genuine savings”, the Shadow Treasurer has rejected my willingness to take the other side of the bet.
Here is my desire to take up Mr Hockey’s offer for a bet: http://www.marketeconomics.com.au/1917-mr-hockeys-offers-up-a-bet-but-will-he-follow-through
Mr Hockey’s squibbing on the matter is probably because he knows there will in fact be “genuine savings”.
Mr Hockey is not willing to bet that there will be a cut in real government spending in 2012-13, something that neither the Howard or Fraser governments ever achieved in 20 Budgets. He knows there will be a cut in real Government spending in 2012-13.
Mr Hockey is not willing to look at the matter another way – taking the government spending to GDP ratio to a level below the average of the 12 Howard Government Budgets. He knows the government spending to GDP ratio will be around 0.5% of GDP below the average delivered by the Howard Government.
To most, these would seem to be reasonable criteria by which to assess “genuine savings”. Mr Hockey would prefer another way.
In rejecting the bet on either real cuts in spending or a lower spending to GDP ratio, Mr Hockey twittered:
- @TheKouk reducing expenditure to level of forecast revenue…let’s take the table at back of Budget Papers re % of GDP. Ps well done on 50BP
Just to repeat: Mr Hockey has set the criteria to be “reducing expenditure to the level of forecast revenue”.
Mr Hockey is framing the bet, it seems, in terms of whether there will either be a surplus or not: That is if expenditure is reduced to the level of revenue, then the Budget is in balance and yet lower expenditure than revenue means a budget surplus.
Even though this is another squibb as a return to surplus is not necessarily a question of whether or not their are “genuine savings”, I will take up the challenge from Mr Hockey.
That said, if the Budget does not return to surplus due to a global double dip recession, for example, hitting revenue, this has nothing to with “genuine savings” in the Budget. This is why I think Mr Hockey has defined hit bet the way he has.
Either way, BET TAKEN MR HOCKEY!
If the government does not deliver a surplus in 2012-13 in underlying cash terms, I will donate $500 to Beyond Blue. It if does deliver a surplus, Mr Hockey, you can make a donation to your favourite charity.
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