Ensuring Responsibility in Australian Budgets

Abstract

Proposals for making governments more responsible are receiving a measure of public attention in both Australia and New Zealand. Whereas in New Zealand such proposals have progressed to legislative actions on budget presentation and commitment to debt reduction, in Australia they have made little legislative headway. However, the governments of both New South Wales (NSW) and Victoria have proposed balanced budget constraints, and the Commonwealth initiated a 'deficit reduction plan' in its 1993/94 budget. (Prime Minister Paul Keating has since dismissed those seeking a more rapid elimination of the Commonwealth deficit as 'deficit Daleks'.) None of these three governments acknowledges that the form of budget presentation - in particular, the actual meaning of the bottom-line 'deficit' - is important to the debate. But discussion about proposals to approach or achieve budget balance naturally reflects, whether explicidy or implicidy, the current Australian concept of 'deficit' or 'surplus'. This is the so-called Government Finance Statistics (GFS) convention, adopted by all nine Australian governments at the 1991 Premiers' Conference. The adequacy of this convention as an indicator of change in a government's net economic position, and the reliability of the accounts in conveying the complete fiscal picture, are major concerns of this article. It doubdess appears responsible to commit to a 'balanced budget'. But the degree of responsibility depends on the details of the commitment, the accounting standard against which the commitment is assessed, and the context in which it is made. If a 'balanced budget' means a zero GFS deficit, it could be consistent with substantial increases in superannuation debt, and some of the revenue contributing to the balance could flow from a conversion of tangible assets into monetary ones. More important, even if there were no underlying debt creation or asset conversion, a balanced budget could mask massive debt accumulated in the past. I have argued elsewhere (Albon, 1994) for a format of budget presentation that both reveals the government's overall net economic position and indicates where