A fantastically clear post from Stephen Gordon on how we went from persistent surpluses to a structural deficit. Really should go read it, or at least have a look at the graphs. Ends with this conclusion:
Here are the policy decisions made between 2005 and 2008 that generated that swing in the pre-recession budget balance:
Transfer payments increased by roughly 1% of GDP.
The GST cut reduced revenues by roughly 0.75% of GDP.
Put the two together, and we get a trend towards a deficit even before the recession hit.
3 weeks ago