When the Liberal Party was in power I often complained that they kept tax too high. In the last budget before the Liberals took over (1995) tax was at 24% of GDP. In the last budget before the Liberals lost power tax had risen to 26.1% of GDP. And apparently this was the era of neo-liberal excessive tax cuts. Sigh.
But in their defense, the Liberals did manage to decrease government spending as a percent of GDP, and combined with their tax increases they managed to run consistent budget surpluses.
My complaint with the Labor party is going to be on the other side of the budget ledger. In the last budget before Labor took over (2007) spending was at 24% of GDP. After two short years it is now up to 28.6% of GDP. That is the highest level in the history of Australia.
The Budget announced yesterday shows that we now face a 2009/10 budget deficit of $57.6 billion (4.9% of GDP). By any measure, that is the largest budget deficit in the history of Australia.
The government claims that the deficit has been caused by the global recession. This is partly true. Revenue has fallen significantly compared with previous estimates. However, over the last year the government has made spending decisions which have cost $27.9 billion for 2009/10 alone. Without these spending decisions the deficit would have been under $20 billion.