Wayne Swan makes right call but loses credibility on Budget surplus
* by: Philip Hudson
* From: Herald Sun
* December 21, 2012 12:00AM
WAYNE Swan had been hoping desperately to break a 23-year hoodoo. A Labor government had not delivered a surplus since Paul Keating was Treasurer in 1989. How long? 23 years... not just my opinion after all.
But, in the shadow of Christmas, he's had to give up the dream, break an election promise and admit he's now likely to chalk up his
fifth deficit, with the red ink totalling more than
$170 billion. Not just my opinion...
It was Labor that made getting the books back into the black a test of its economic credibility.
It was a "guarantee", said Julia Gillard . It would be delivered "come hell or high water", said Swan. Not just my opinion.
"You can't run this country if you can't manage its Budget," the Prime Minister said in April last year. They are the political quotes that will now haunt the ALP and be used by the Opposition to attack the competency and truthfulness of the Prime Minister.
In dumping the pledge of a surplus in 2012-13, the Treasurer says he is putting jobs and economic growth first. That is exactly the right decision by a political leader.
What use is a surplus to the manufacturing worker who loses their job because of the squeeze put on the economy to achieve some political Holy Grail?
Another round of slash-and-burn pain just to make the books look good would not be in the national interest. Not just my opinion.
Swan's backdown is being cheered on by business leaders and the Greens - who never agree on anything - as well as a bore of economists.
The trigger was the monthly update of the accounts showing in the first four months of the financial year a $3.9 billion
shortfall in revenue, which Swan said was "a sledgehammer hit to our revenues".
He says it is not because the Government is spending too much, in fact he says spending is down by $1.3 billion as well. It just hasn't collected the money it expected because the unique combination of low commodity prices and a high dollar has crunched business profits and there's less tax to be paid.
Incompetence abounds.
The Opposition's counter claim is that the Government is spending $100 billion a year more than it did five years ago and too much of it is wasted.
Swan replies that every dollar spent since mid-2009 has been matched by a spending cut. And he's still promising his next Budget will set out how the big plans to boost education funding and start the National Disability Insurance Scheme will be paid for.
Don't tell me anyone has swallowed that one. 
There was never going to be a good time for Labor to capitulate on the surplus. It ranks up there with the "no carbon tax" pledge and not sending asylum seekers to Nauru and Manus Island on the scale of broken promises. not just my opinion.
There will be suspicion about doing it five days before Christmas or, as shadow treasurer Joe Hockey says, "taking out the garbage five minutes before Christmas".
But having decided to bite the bullet, Labor did not want to start the 2013 election year with a broken promise, although that won't stop Tony Abbott from reminding voters of
the fact every chance he gets.
yes THE FACTS
In May and October, Swan was still desperately trying to keep the surplus alive by cutting welfare for single parents, reducing the baby bonus and curbing the private health insurance rebate.
But he now faced having to inflict more pain in an election year. Labor MPs were screaming for him to drop the surplus fetish.
Proving just how big a decision this was, Swan had extensive talks with Gillard, who is on holidays, and other ministers before it was decided to announce the politically embarrassing backdown.
Swan admitted as much by saying if the politics was bad, then "so be it".
He will redouble his efforts to sell the message that Australia's economy is the envy of most other countries, with stronger growth and lower unemployment, and the Budget is in much better shape than countries in Europe or the United States, where they are trying to avert going over the "fiscal cliff".
HE will be hoping an interest rate cut from the Reserve Bank early next year will mean much more to voters than whether he has a surplus or deficit.
Oh yeah that strategy is working all it will do is devastate those trying to live off their savings.
The Opposition plans to use Gillard's own words against her. Take these two examples:
"My commitment to a surplus in 2012-13 was a promise and it will be honoured," Gillard told the Sydney Institute on April 13, 2011. 
"It's vital to get the Budget back into surplus and back into the black. That's what this Budget has done. That is the best thing we can do to help families with cost of living pressures," she said on May 11 last year.
Labor inherited
no net debt and a surplus of $20 billion from Peter Costello in 2007 and, to get voters to trust it with the economy, Kevin Rudd said he wore with pride the badge of "economic conservative".
facts... not just my opinion.
The global financial crisis changed all that. Labor's response - on the advice of Ken Henry, who was picked by Costello to run the Treasury - was to "go hard, go households" and spend its way out of recession.
A $42 billion mini-Budget aimed at nation-building and jobs plunged the nation's finances into the red but Labor said it was only a "temporary deficit".
Five years on, the deficit remains.
It may be the right economic call, but it's tricky politics for
a PM already under fire for breaking promises. Fact not just my opinion.
In a $400 billion Budget there is no real difference between a $1 billion surplus and a $1 billion deficit, but it was Swan and Gillard who pumped up the political importance of the surplus.
In part, they did it because they wanted to put the blowtorch on the Coalition's rubbery Budget numbers.
They've now burnt their own backsides. 
Phillip Hudson is Herald Sun national political editor
