Is Bowen’s Budget Update Predicting A Mass Extinction?

4 Aug


Here is a classic example of why this government’s constantly revised economic predictions are not worth the paper they are printed on.

And why — as quoth MacroBusiness reader “Mav” — we could replace the Treasury department with a monkey and a dartboard, and get the same standard of accuracy with economic forecasts.

According to Bowen / Treasury in their “$33 billion black hole” Economic Statement released on Friday, this year the headline unemployment rate will rise to 6.25%. With an annual growth rate in employment of 1%. It will remain at 6.25% in 2014-15, with employment growth of 1.5%.

In 2015-16, however, something magical is predicted to happen.

Despite employment growth remaining steady at 1.5%, the unemployment rate will, somehow, plummet to 5%:

August Economic Statement, Overview, page 1

August Economic Statement, Overview, page 1

Er … say what now?

I am not the only one questioning this “major economic parameter”, on which all the budget predictions are based — including tax revenues, the public debt level, interest expenses, and an alleged return of that mythical creature in the ALP museum, a surplus in 2016-17.

National Australia Bank were quickly out with an economic statement of their own on Friday, where they too remarked on this amazing budget prediction:

The estimates beyond 2014/15 appear unrealistic, with employment growth too weak to reduce the unemployment rate to 5%. While 1½% employment growth in 2014/15 is expected to maintain the unemployment rate at 6¼%, the same employment growth in 2015/16 reduces the unemployment rate to 5%.”

The only way that is possible, is if they are expecting an awful lot of people to leave the work force, and yet, not be counted as “unemployed”.

A mass extinction event?

Or a mass retirement of baby boomers, perhaps.

If so, then all those folks looking forward to retiring in 2015-16 will be very pleased to know that, under the government’s Crisis Management strategy, APRA is being given “robust” new statutory powers — “direction powers”, they say — which enable the government to order your super fund where and how it should “direct” your super.

For your benefit, of course (see Crisis Management: APRA To Be Given Power To “Direct” Your Super).

Somehow though, I don’t think a mass retirement of baby boomers is a plausible, or sufficient explanation for that amazing budget update prediction.

A more plausible explanation is one that I came across recently … alas, I cannot recall where.

And that explanation was, that in the years beyond the “Estimates” period — those years labelled “Projections” in government budget figures — the Treasury modellers simply assume a “return to trend” for major economic variables.

How does that return to “trend” happen?

Who knows.

It is an assumption.

Just like so much of the pseudo-science we call “economics”.

Oh yes, by the way.

In 2015-16, when unemployment will magically plummet from 6.25% to 5%, the government is predicting a deficit of $4.7 billion. And then, a surplus of $4 billion the following year:

August Economic Statement, Overview, page 1

August Economic Statement, Overview, page 1

It’s magic Johnny … magic!

4 Responses to “Is Bowen’s Budget Update Predicting A Mass Extinction?”

  1. Tomorrows Serf August 4, 2013 at 7:23 pm #

    Smoke, mirrors, bulls**t and magic!

    Let’s all apply for Treasury jobs. It seems anyone with a pulse can get one. (and I hear the benefits are pretty wild)

    • bushbunny August 6, 2013 at 1:44 pm #

      No wonder they kicked out Wayne Swan? Now they are revealing the facts and God help the coalition trying to unravel all this mess. Anyone who votes for ALP and that man who now leads them needs their heads examined. The economy is the heart beat of this country, and without a stable economy we will end up in a recession again, unemployment is high now, especially in the regional areas. I suspect he’ll get in again in his electorate, the thought of Albanese being the next opposition PM is a nightmare. Although I am not in anyway versed in economics, I know that the value of our dollar is dropping it would appear. Which means America and Europe are on the rebound.

  2. Kevin Moore August 4, 2013 at 9:13 pm #

    I notice that “The Treasury” has an ABN number. Does that mean that it is not a government dept. under the constitution, but is a privately owned corporation?

    Contact the Treasury
    Telephone +61 2 6263 2111 or
    1800 020 008 (Switchboard, 8.00 am to 5.30pm AEST)
    Facsimile: + 61 2 6273 2614
    Email Us
    ABN: 92 802 414 793

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