Penny Wong the $106bn woman

Illustration: Sturt Krygsman Source: TheAustralian

CAMPAIGN Day 10: As much as Kevin Rudd wants a presidential-style election campaign as September 7 draws nearer, senior members of his leadership team deserve close scrutiny too.

To be fair, Chris Bowen has barely warmed his seat as new Treasurer. That said, after Labor's record, a young politician such as Bowen should have practised budgeting skills in a small business using his own money before taking the reins of a trillion-dollar economy.

Next in line is Labor's Finance Minister. Penny Wong seems to float above the fray, attracting accolades from those not paying much attention to detail. Don't get me wrong. Wong is a charming, articulate, ambitious, thoroughly decent woman. Media savvy, she has a wonderfully easy manner, she's calm, unflappable, funny and has a smile that's a winner on camera. Q&A audiences love her and her politics.

However, genuine political leadership is not about being liked. It's about earning respect for a job well done. On that score, the Finance Minister has been a disaster. How extraordinary, then, that her senior role of almost three years has escaped serious examination.

Since Wong became Finance Minister in September 2010, Australia has had four budgets: 2010-11, 2011-12, 2012-13 and the most recent one in May for 2013-14. Let's add the economic statement Wong delivered with Bowen on the Friday before the election was called. Wong has lent her name and her reputation to a set of numbers that tell a story of mind-boggling incompetence. To be extra cautious and extra fair to Wong, let's exclude the 2010-11 budget as she was not finance minister when that was delivered in May 2010.

Starting with that first budget - 2011-12 - when Wong was Finance Minister, she and Labor predicted a budget deficit of $22.6 billion in 2011-12. She was out by more than $20bn. The most recent budget in May revealed a deficit for 2011-12 of $43.3bn. It gets worse. In that first budget, Wong predicted a surplus of $3.5bn for 2012-13. She was out by $22.9bn with the actual result being a deficit of $19.4bn.

And, yes, it gets even worse. In that first 2011-12 budget, Wong predicted a surplus of $3.7bn for 2013-14. By July this year, Wong was already out by $33.8bn this time. Her economic statement revealed a deficit of $30.1bn.

Back in 2011-12, Wong promised a surplus of $5.8bn for 2014-15. Now Wong tells us it will be a $24bn deficit, putting her out by another $29.8bn.

Cumulatively that makes Wong the $106 Billion Woman. That's not an accounting error. That's record incompetence.

If we add a third decimal point, or if the actual results for 2013-14, 2014-15 are also wrong, Wong becomes the $107 Billion and Beyond Woman - but what's a few billion between friends?

Of course, Wayne Swan also bears responsibility for the budget debacle facing this nation. As treasurer, he presided over government spending that has cemented structural budget deficits in this country.

Whereas spending during John Howard's last year in office was 23.1 per cent of gross domestic product, under Swan it rose to above 25 per cent. That rise is not sustainable.

Instead of listening to Bruce Springsteen albums in the evenings, Swan should have attended meetings of Spenders Anonymous. Whereas the budget should be in surplus after a record mining boom, Australia faces years of deficits. That Australia enjoys a AAA rating has everything to do with the starting point Swan inherited: no net debt and a whopping surplus. As the Australian economy faces a downward turn, it is more vulnerable than ever - and has no surplus cushioning to soften the blow.

Swan is gone, and rightly so, relegated to the dustbin as one of Australia's most profligate and clueless treasurers. That leaves Wong, one of the most senior and influential members of the Gillard government and now the Rudd government. What has she done during her time to rein in spending or to inject caution into the forecasts? Not much.

Wong, who has been the longest serving Finance Minister during the past six years of Labor, also has been appointed as Labor's election campaign spokeswoman. While Rudd fronts the cameras daily free of shame and full of chutzpah, clueless about his lamentable record, Wong must surely understand why even her affable character cannot hide the mess on her watch. She must find it hard to keep putting her name to numbers that end up bearing no resemblance to reality.

How seriously, then, can we take the latest figures? Labor released an economic statement before the 2010 election that forecast a deficit of $10bn for 2011-12. More about politics than economics, the aim was to lock in figures in the 2010 pre-election economic and fiscal outlook, a document that Treasury and Finance are required to release within 10 days of the issuing of writs for a federal election. A month after Labor's July 2010 economic statement, PEFO forecast a budget deficit of $10.4 bn. The real deficit for that year was $43.4bn - a $30bn-plus turnaround from a pre-election promise to post-election outcome.

That shadow hangs over the latest PEFO, released yesterday, which basically confirms the numbers in the government's July economic statement.

And that's why Joe Hockey faces a monumental task trying to work out the forecasts from the fairytales.

While some may be tempted to say a PEFO, SCHMEFO, the one virtue of the document from Treasury and Finance is clear from a quick glimpse at history. At 11am on Sunday, March 3, 1996, Howard received something called the Red Book that set out the true state of the nation's finances for the incoming government. It told a rude story about a $10.5bn deficit whereas the Keating government had promised a surplus. New treasurer Peter Costello found out a day later and he fast introduced a Charter of Budget Honesty that required the secretaries of Finance and Treasury to set out the true state of the budget in a pre-election economic and fiscal outlook.

When Rudd received the Red Book after the 2007 election, thanks to the discipline imposed by PEFO, it was a story with no deficit surprises, no hidden liabilities, no rude budget shocks. Instead, a healthy $20bn surplus was soon revised upwards.

Those were the days. At least PEFO has forced Wong and Bowen to come clean about their budget blowout, now $33bn, not the $18bn mentioned in the May budget. That said, not even a nice smile can save Wong from being remembered as the $106 Billion Woman and this nation's most incompetent Finance Minister.