Last night’s Federal Budget in Australia proved once again how dominant the macroeconomic myths are in policy development. You can read my pre-Budget comments – Budget 2012: a recipe for disaster – and apart from the 2011-12 deficit being larger than the Government planned as a result of the slowing economy undermining its estimated tax revenue (in other words, the Government was overly optimistic in its forecasts last year) I would not have written much different after seeing all the Budget documents. It remains the largest fiscal consolidation attempted in one fiscal year (equivalent to 3 per cent of GDP) at a time that GDP is growing around 2.5 per cent.and I cannot see private spending growth picking up to fill the gap. Outcome – a movement towards recession. Conclusion – poor fiscal management. But the Budget Papers that the Government releases are always interesting reading and one day I plan to trace the evolution of the shifts in macroeconomic ideology through the way the papers are presented (format, tables, and narratives). There you learn what the economists in Treasury think and the ideas espoused are generally applicable to the international debate given that the tentacles of the dominant paradigm of the day spread widely. In Budget Paper No 1, Statement 4 – Building Resilience Through National Saving we are provided with a demonstration lesson of how a fiat monetary system does not work and a classic depiction of the way the mainstream narrative deceives the citizens.