Monday, 5 May 2014

How to read graphs

Sinclair Davidson is at it again. he has some graphs that show spending-is-the-problem.

Hmm. Let us examine them shall we. If we take into account the first budget and second which were paramount in ensuring Australia did not face a recession because of the GFC then NOMINAL spending rose a total of 16.2% over the five years. That means an average NOMINAL rise of 3.2% each year. In real terms the ALP cut spending in real terms TWICE. Indeed in the last Swan budget for which he had total responsibility Swan actual cut spending in NOMINAL terms. Indeed he produced the most contractionary budget in budgetary history.
This of course that Davidson asserted after it was delivered was expansionary!!!
Think about this. If revenue as a % of GDP was lower for the ALP than for the previous Liberal Government and spending was the problem then how did the budget deficit ever fall as a % of GDP???

If you examine the graphs then the trend in spending is clearly falling until 2013/14. It rises primarily because Hockey increased spending on coming to office and changed the assumptions made in MYEFO from those made in PEFO.
One of the most significant was NOMINAL GDP only rising 3% for two successive years.

The Kouk has shown us what occurs when you change said assumptions

Wow if assumptions made about NOMINAL GDP are relaxed then more revenue comes in and hey presto NO budget deficit.

So much for spending is the problem!

It always helps to know something about the subject you are writing about!

I haven't really dealt with all this at all either!