Tag Archives: august economic statement

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!

5 Years After The GFC, ALP Admits Economy Has Not “Recovered”, And 3 More Won’t Help

3 Aug


The Global Financial Crisis peaked in 2008-09.

Since then, the ALP has relentlessly talked up the “strength” of our economy — by comparing to basket-case northern hemisphere countries — and by extension, the brilliance of their economic management.

Many hundreds of times, they promised a “return to surplus”. And fair enough too.

After all, our economy was — so they said — the “strongest advanced economy” in the world.

We had a “huge pipeline of investment”.

“Low unemployment”.

“Low inflation”.

“Low interest rates”.

And record-high Terms of Trade (ToT), from a Chinese stimulus-fuelled mining boom.

A mining boom that — so they said — would give us a period of “unprecedented prosperity”, “stretching to 2050”.

They should know.

After all, their leader is fluent in Mandarin.

And yet, despite all this … no surplus.

Only more, and deeper deficits.

Yesterday, they admitted that their latest budget — released less than 3 months ago — has already developed a $33 billion black hole.

Word is, they are now going to call an election, for September 7.

So we should, perhaps, pause for a moment to reconsider the strength of our supposedly “strong economy”, according to the ALP’s own words, and their own yardstick.

In the August Economic Statement released yesterday, in one little paragraph, the ALP has conceded that 5 years after the GFC, the economy has not “recovered”:

August Economic Statement, page 29 (click to enlarge)

August Economic Statement, page 29 (click to enlarge)

And their newest revised forecasts, showing deficits to 2016/17, tells us that 3 more years of their brilliant economic management won’t help.

The simple truth is this.

By their own measure — a budget surplus — the economy has not “recovered”.

And with their revised “forecasts” now predicting rising unemployment, and no surplus till 2016/17, there is no hope in sight for an economic recovery.

Under their management, at least.

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