For budgets only smaller is tougher

However there is the prospect, at least in the short term, that the government may end up expending additional funds either upon potentially ineffectual education and training programs for welfare dependents or, worse still, on additional bureaucrats to oversee the changes.

The far greater question that can only be answered in this week's Budget is whether Prime Minister Gillard and Treasurer Swan are prepared to go much further and instigate meaningful expenditure reductions to ratchet down the size of the commonwealth government.

I suspect that, on this score, we may be heading for disappointment.

When it comes to some of the expenditure cuts already identified, or speculated upon, it is possible that the government is gearing up to play the old political trick of announcing less severe cuts, or none at all, on Budget night, in an effort to boost its flagging electoral popularity.

One can also expect the Budget to contain its fair share of fiscal gimmickry, including the conflation of revenue increases, such as the flood levy piggybacking the personal income tax structure, as budget 'savings.'

Similarly, the Budget papers might also include 'phantom' expenditure reductions such as the recent announcement that the Defence Department will be required to cut 1,000 intended, but yet to be filled, vacancies over the next three years.

Even before the Treasurer rises to his feet on Budget night, the government's self portrait as a tough budget taskmaster will also be cruelled by a cash splash of election promises expected to total more than $540 million over four years.

More fundamentally, it is doubtful that this government has the political constitution to cut back the size of the public sector to any great extent when that could incur the wrath of its public sector union voter base and reverse its own legacy of big spending.

During 2008-09 the Rudd government spent an unprecedented $80 billion over the forward estimates in an effort to avert an Australian recession during the global financial crisis (GFC).

In that year federal government payments blew out to $316 billion, an increase of $44.2 billion on the previous year. This included the extra public servants to oversee the GFC fiscal stimulus, as well as the fulfilment of 2007 election promises.

Adjusted for inflation this spending outcome was equivalent to a staggering 13 per cent increase, which has only been exceeded by Whitlam's 1974-75 budget which increased its expenditure levels by 20 per cent compounding the bitter effects of stagflation.

Any allusions that the government would maintain a fiscally conservative stance, as promised by former Prime Minister Kevin Rudd during the 2007 election, were greatly diminished as a result of its big spending venture.