Back to the Black Swan

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Image caption Treasurer Wayne Swan said he wanted Australia to live "within its means"

While Kevin Rudd has always seemed to me to have the look of a European finance minister - of Norway, say, or perhaps Belgium - it is the Treasurer Wayne Swan who in recent weeks has sounded like one.

For all the admiring talk beyond these shores of an economic wonder from down under and the resumption of the China-fuelled resources boom, Mr Swan's pre-budget musings raised the spectre of a word not normally associated with Australia: austerity.

Hardly European austerity measures, it has to be said. By international standards, the size of the deficit is small - about 3.5% of GDP. But significant cutbacks in government spending nonetheless that are designed to bring the budget back to surplus by the middle of 2013. That would make Australia the first advanced nation to return to surplus after the global financial crisis.

This seems to be as much a political goal as an economic one. Just as Kevin Rudd liked to portray himself as an "economic conservative", Wayne Swan and Julia Gillard have become self-styled deficit hawks. It gives them some protection against the charge that they have the fiscal profligacy of a sailor on shore leave, the traditional tax-and-spend charge levelled against Labor by the Liberals.

So Swan has been sharpening his talons - ornithologically incorrect as that sounds. On that front, I'm surprised there have not been more "Back-to-the-Black Swan" references. It sounds like Natalie Portman's next movie project.

The warnings have been of "substantial savings", of a welfare crackdown on spongers and "bludgers" and of rivers of gold from the mining boom mark II that no longer flow with quite the same mighty thunder as of old.

So after all the spin and counter-spin in the run-up to the "back-to-the-black" budget - which in Australia is the great set-piece event of the political calendar, a kind of quasi-State of the Union - what actually happened?

For a start, there were cuts of more than $A20bn ($21.6bn, £13.2bn) in the budget, but they were not as swingeing as previewed, which should hardly come as a surprise. The Australian is calling this a "nip and tuck" budget of "thousands of tiny cuts". The ABC economics correspondent Stephen Long, who can always be relied upon to come up with the pithiest of phrases, called it as "tough as tofu". Better still, he quotes from the lyrics of Lou Reed: "Vicious - you hit me a flower."

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Image caption Flooding followed by a cyclone earlier this year took a toll on the Australian economy

Furthermore, we can now put a figure for what Australia's summer of disasters cost the economy: $A9bn in lost output. With the overlapping impact of the Japanese and Christchurch earthquakes, ¾ of a percentage point will be taken off economic growth.

Even though Australia managed to avoid recession after the global financial crisis - the wonder from down under's most ringing boast - the GFC has hit the economy hard. Some $130bn in lost revenue. The crisis was "larger and lingering longer", Mr Swan told those poor Canberra journalists kept lock-down for the afternoon while they were given an advance read-through of the budget - a journalistic form of mandatory detention that, thankfully, I have always managed to avoid.

A message running through the budget was that the Australian economy cannot continue to rely on the resources boom for its revenues - partly because the mining giants, like Rio Tinto and BHP Billiton, are investing so heavily in infrastructure, for which they receive tax deductions. It helps explain the emphasis on training in the budget and the retooling of the Australian workforce. This budget was about "jobs, jobs, jobs", said Swan.

Clearly, not everyone is cashing in from the resources boom, and he also noted that Australia now has a twin-speed economy - he called it a "patchwork economy".

On the spending front, the big winner was mental health. One third of Australians will suffer from some form of mental illness during their lives.

The back-to-black budget was not particularly green, with savings by shelving the Green Car Innovation Fund. Politically, that's tricky, given that the Greens will hold the balance of power in the Senate from July onwards.

Finally, this was a politically cautious budget from a minority government that does not have the numbers to be politically bold.

For those interested in the nitty gritty of the budget, I am thinking you will have looked elsewhere. The ABC has a comprehensive rundown. You can also read the full speech here.

It was the first budget where I eavesdropped on the Twitter conversation. "Do they sit around and watch Budget Night on TV in other countries?" asked Caroline Overington of The Australian. "It doesn't seem cool, somehow."

No they don't, I suspect, and no it doesn't.

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