My current number one candidate for the worst economics article of the year

Unfortunately, the so-called progressive UK Guardian has an Australian economics editor who is anything but if his economic analysis is anything to go by. The economic news for this week started with the release of the – Final Budget Outcome – (FBO) for the 2024-25 fiscal year for the Federal government (released September 29, 2025). It showed the actual fiscal deficit for the year just gone was slightly lower than had been predicted in earlier official statements. The government celebrated claiming a lower deficit was a sign not only of its good management but was also virtuous. The journalists, however, had a different spin, claiming that while the situation could have been worse, it was still bad. The discussion in the media and the official statement from the Treasurer seemed to omit one rather important fact. The context. This allows us to understand the distinction between ‘good’ and ‘bad’ fiscal deficits, a distinction that the commentariat seems unable to grasp. Anyway, this UK Guardian article is my current number one candidate for the worst economics article of the year. Why discuss it? Because it helps illustrate the essentials of macroeconomics that people need to understand.

Note we do not use the term ‘budget’ to describe the government’s fiscal statement because it invokes the process that household undertake to manage their spending choices with their income, given they are financially constrained. As the federal government is not so constrained the term lacks meaning when discussing its spending and revenue outcomes.

The – Part 1: Australian Government Budget Outcome 2024–25 – notes that:

In 2024–25, the Australian Government general government sector recorded an underlying cash deficit of just under $10.0 billion (0.4 per cent of GDP). The outcome is around one-third of the estimated deficit at the 2025 Pre-election Economic and Fiscal Outlook (PEFO) and around one-fifth of the estimated deficit at the 2022 PEFO. As a share of the economy, it is around one-fifth of the average deficit between the Global Financial Crisis and the COVID-19 pandemic.

The 2024–25 outcome was an improvement of $17.9 billion (0.6 percentage points of GDP) against the 2025 PEFO, $17.6 billion (0.6 percentage points of GDP) against the 2025–26 Budget, and $37.1 billion (1.5 percentage points of GDP) against the 2022 PEFO.

Note the use of the term “improvement” which is defined purely in terms of the the numbers themselves (no context).

In other words, using the Treasury’s logic, an ‘improvement’ is a lower fiscal deficit or a higher fiscal surplus, irrespective of what else is happening in the economy.

Which really marks on of the crucial points of departure that Modern Monetary Theory (MMT) provides us with.

The difference is perspectives goes to the heart of the purpose of fiscal policy.

Is it to reduce the fiscal deficit by $A17.9 billion against forward estimates, or is it to advance the well-being and sustainability of the nation?

MMT economists consider an ‘improvement’ in the fiscal situation is when fiscal policy is effectively advancing the well-being and sustainability of the nation, irrespective of what the actual numbers that the Treasury comes up with.

In other words, there must be a real context separate from the numbers, which in themselves tell us nothing important.

The Federal Treasurer, of course, is in the context free camp and immediately issued a press release (September 29, 2025) – The biggest Budget improvement in a single Parliamentary term – and added all the self-aggrandising spin to the numbers, but essentially forgot to mention that in June 2024 the unemployment rate was 4 per cent, and by the end of the financial year (which these numbers cover) it had risen to 4.2 per cent.

In fact, there was no mention of anything that a typical citizen might deem to be adding to their sense of well-being.

Since this current government was first elected, the unemployment rate has risen from 3.4 per cent to 4.2 per cent, which amounts to around 158 thousand persons being added to the jobless pool that were mostly in paid employment.

Rising unemployment, in an environment of declining employment growth, is not an improvement in any reasonable estimation.

The purpose of fiscal policy, among other goals, is to push unemployment down to its irreducible minimum (people shifting between jobs in the survey week).

Using this logic, the fiscal strategy of the federal government is failing badly.

Such a deficit in attention to the things that actually bear on peoples’ well-being should be grist for the mill for progressive journalists, if they were doing their jobs properly.

But that logic apparently doesn’t apply to the Australian economics editor for the UK Guardian.

His commentary on the fiscal release by the Australian government – Jim Chalmers’ budget victory lap outpaces reality as Australia’s debt continues to climb (published by the UK Guardian, September 29, 2025) – masquerades as ‘Analysis’, but turns out to be a contender for the worst economics article in 2025.

Of the many very bad articles I have read so far this year, this one will take some beating for the worst article award.

Just the terminology is off-putting:

The treasurer celebrated an outcome that could have been worse, but a structural challenge remains as workers are left with the burden of repair.

Cars and bicycles need repair when they become unfit for purpose.

The use of the term in the context of fiscal aggregates has no meaning.

The journalist is leading his readers into the – ‘fiscal deficits are bad, surpluses are good’ – narrative.

That is leading them into a world of blind, uneducated ignorance.

Probably to join him.

What the FBO demonstrated was that after squeezing the economy for several years with fiscal surpluses (on the back spending austerity and rising tax revenue, economic growth is now stalling and unemployment is rising, such that the growth in tax revenue is stalling and spending is rising to meet the growing welfare bill.

The Guardian journalist’s take on that is that:

After delivering two straight surpluses, Monday’s final budget outcome confirmed the country’s finances slumped to a deficit of $10bn in 2024-25.

A small and expected deficit for the recent financial year is no disaster, but nor is it great news.

First, note the language – “slumped” – invoking a shift into deficit is a bad thing.

Would the journalist use that imagery had the fiscal deficit risen at the same time as economic growth was stronger and unemployment and underemployment was falling?

Second, notwithstanding my complaint about the language, the journalist is correct, it is not great news.

However, he is correct for the wrong reason.

Why?

Here we have to distinguish between ‘good’ and ‘bad’ fiscal deficits.

Many critics wrongly characterise MMT as saying fiscal deficits do not matter, which just illustrates their own lack of knowledge.

Of course, fiscal deficits matter, but not in the way the mainstream economists or this journalist would like us to believe.

Essentially, there is a specific level of aggregate spending that will be just sufficient to ensure that demand is strong enough for firms to offer jobs that will provide the hours of work desired by the available labour force.

That level will be a mix of government and non-government spending.

As productive capacity expands and potential output rises, spending growth also has to be positive and keep pace with the supply-side growth.

Typically, non-government spending will not be sufficient to provide enough jobs to satisfy the full employment spending level.

If full employment is to be maintained, then government spending must fill the spending gaph.

If the gap widens, perhaps because households and/or firms become pessimistic, then government spending has to rise to fill the gap (or grow faster).

So if the government is intentionally acting to fill the spending gap ex ante (that is, before the reckoning), we would call the resulting fiscal deficit good.

However, as in the case of the Australian government at present, which has recorded two consecutive fiscal surpluses, the fiscal drag that it has created opened up the spending gap and growth has slowed and unemployment has risen.

In that case, tax revenue growth is declining (more people unemployed and not paying tax) and welfare spending is rising (those extra unemployed are receiving income support), and it is little wonder that the surplus obsession is finally catching up with the government and the fiscal balance has moved back into deficit.

This sort of deficit is bad because it is not only unintentional but arises from a lack of commitment to full employment.

The UK Guardian journalist, however, uses the words good and bad in an opposite way.

For him, it “is good” that the actual 2024-25 fiscal deficit came in around $A17.9 billion lower than it was projected in the “pre-election economic and fiscal outlook forecast”.

It “could have been worse” was his description of the situation.

And his rather ill-informed use of the English language continued:

The budget is not “getting in better shape”, unless you reckon shifting from a surplus to a deficit – with an even wider deficit predicted for this financial year – is an improvement.

The quoted phrase appeared in the Finance Minister’s press statement.

But you get the drift – for this economics commentator – it is a simple matter – a “wider deficit” is bad.

Does he provide the readers with any benchmark upon which to make that assessment?

Of course not.

It is just a context free evaluation where a bigger deficit number is bad and a lower one is good, irrespective of what else is happening.

And that ‘what else’ is everything that really matters to the material prosperity of the people.

The UK Guardian journalist then turned to the ‘debt problem’ and noted that:

Meanwhile, debt is climbing, not falling, as is the interest we have to pay on that debt.

In fact, interest payments are the fastest-growing major payment in the budget, at an estimated annual average of 9.5% over the coming decade.

Some facts:

1. The FBO statement shows that Net debt has barely moved in the last three fiscal years.

In 2021-22, it was 22.1 per cent of GDP and still a hangover from the COVID expenditure.

In 2022-23 it was 19.1 per cent of GDP and in the latest fiscal year (2024-25) it was 19.2 per cent.

2. Interest payments for the last three years have been stable at 0.5 per cent of GDP, during a period when the RBA was raising interest rates.

3. In terms of total outstanding Australian Government Securities, they have fallen from 38.4 per cent of GDP in 2021-22 to 33.5 per cent in 2024-25.

4. Total interest payments on that outstanding debt has risen over the same period from 0.7 per cent of GDP to 0.9 per cent (in 1985-86, for example, that proportion was 2.9 per cent).

But obsessing about these figures is a waste of time.

First, the borrowing is voluntary – given the federal government is the currency issuer.

Second, if the interest payments ever became a problem – pushed total spending beyond that necessary to close the spending gap, then the government could stop issuing debt or the RBA could just buy it all up as they (mostly) did during COVID.

Third, the interest payments constitute non-government sector income and may reduce the non-government spending gap.

At any rate, beating up a crisis on the back of these figures is nonsensical.

The journalist wasn’t done though.

Inevitably, the international comparisons creep into these types of articles.

And so they did:

… most other similar countries would love to be in our position.

A small deficit worth 0.4% of GDP looks fantastic when compared with the United States’ extraordinary deficit worth 6.4% of its economy.

The same is true for our debt burden, which, while expanding, is equivalent to 50% of GDP, including the states and territories.

In contrast, the average among the G20 countries is over 100%.

But is it enough to be the best of a bad lot?

The G20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, the European Union, and the African Union.

There are different monetary systems within this group.

Comparing a currency-issuer such as Australia with Eurozone Member States, for example, who use a foreign currency is invalid and typifies the poverty of this article, which is representative of the tripe that is served up by journalists masquerading as economic experts.

Comparing Australia with Argentina, which pegs its currency to the USD and borrows in foreign currencies is invalid.

The debt issued by Australia, Japan etc carries no intrinsic credit risk.

A currency-issuer may default on debt repayments but it won’t be because they cannot fund the liabilities.

The debt issued by France carries intrinsic credit risk because the French government does not issue the denomination of the debt.

The UK Guardian article decided to become metaphorical in quoting some character from the financial markets, who claimed that Australia’s fiscal position was akin to:

… boiling frog.

So, we all know what happens to the frog in the saucepan as the heat slowly rises.

What do these so-called experts think will happen if the Australian government doesn’t run surpluses?

It is not specified other than the government will have to increase future taxes to pay back the deficit.

This scaremongering is sufficient for the journalist to think he has gravitas.

So we just get the ‘future generations’ “will bear the consequences” guff.

First, government’s do not pay back deficits.

Deficits are the balance between two flows (spending and revenue) and once they have flowed they are gone.

What the journalist is claiming is that the government will have to return to surplus and with expenditure forecast to grow a bit over the next 10 years, tax revenue will have to rise to ensure the surplus.

He thinks the only way tax revenue increases is if tax rates rise.

But continuous deficits have a habit of driving growth in employment and tax revenue.

Australia currently has around 10 per cent of its available labour underutilised (either unemployed or underemployed) and that is a huge tax base that is not being tapped.

In addition, some proportion of it is soaking up expenditure in the form of income support payments due to joblessness.

So there is no necessity for tax rates to increase at all for revenue to rise to match the increasing expenditure, even if we were to accept the ridiculous idea that the only ‘good’ outcome is a fiscal surplus.

Second, we know if the government ramps up its moderate current austerity then the economy will certainly enter recession.

Job opportunities will evaporate, particularly those that the future generations would normally take as they leave the education system and enter the workforce.

We also know that the services that the future generations would like to enjoy will be less available and of poorer quality and the infrastructure (health care, education for their kids, transport, etc) will be degraded.

That is the true burden that the future generations will bear.

Conclusion

My current number one candidate for the worst economics article of the year.

That is enough for today!

(c) Copyright 2025 William Mitchell. All Rights Reserved.