Treasury Projections

An argument one often hears to try and convince people, that we shouldn’t get some of our taxes back, is that yes we had a big surplus this year, but hey look at the projections for future years – that surplus won’t be so large.

So let us review the history of Treasury projections of the Operating Balance or surplus.

The 2003/04 surplus was $7.4 billion. It was originally forecast to be $3.2 billion.

The 2004/05 surplus was $5.8 billion.  It was originally forecast to be $2.7 billion.

The 2005/06 surplus was $11.5 billion.  It was originally forecast to be $4.2 billion.

The 2006/07 surplus was $8.7 billion.  It was originally forecast to be $6.2 billion.

Now to be fair to Treasury, forecasting the income and expenditure for an entire country is damn hard.  Hell it can be hard to forecast earnings for a single company, let alone all of them.  Nevertheless their conservatism is starting to affect the credibility of the forecasts.

I’m more forgiving of a $6 billion change from an initial forecast four years out, to an actual than a smaller change over a smaller time period.  But let’s look at how the forecasts for 06/07 have changes over the years:

May 2003 = $6.2 billion
May 2004 = $5.1 billion
May 2005 = $5.3 billion
May 2006 = $5.8 billion
Dec 2006 = $6.3 billion
May 2007 = $6.6 billion
June 2007 = $8.7 billion (actual)

Yes the surplus to 30 June was $2.1 billion higher than when the Budget came out in May.

Now this year’s surplus was forecast in the BEFU to be $6.4 billion.  That means it could well be over $9 billion, which would make the surplus over five years  exceed $40 billion.