Barnaby Is Right

I am so glad that Wayne Swan is such an imbecile.

It means that, despite being sick, I can debunk his entire budget with about as much ease as taking candy from a baby.

Or a Baby Bonus from a “working family”.

All of the “estimates” and “projections” in Wayne’s 2013-14 budget are based on a critical assumption – 5% annual growth in GDP in the next two years:

Budget 2013-14 Overview, Appendix H

Really Wayne?

5% a year?

Let’s see what the RBA’s Chart Pack has to say about actual, not “forecast” GDP –

Er…

Anyone else get a sense of deja vu about this?

With good reason. In last year’s budget, Wayne forecast 5% GDP growth for the current year…

Budget 2012-13 Overview, Appendix H

… and since then, has been forced by that little thing called “REALITY” to revise it down, to 3.25% (see 1st chart).

Remember, this 35% downward revision for “GDP” growth in the current year has come during a period when, according to none other than Wayne himself, we have been enjoying the benefits of a “strong economy, low unemployment, low interest rates, and a huge (mining) investment pipeline.”

Not to mention record-high Terms of Trade.

That “huge” mining investment pipeline is rapidly closing down.

And the record-high Terms of Trade are collapsing too:

Source: macrobusiness.com.au

5% GDP growth next year, and the year after?

Sorry.

I don’t buy it.

Neither should you.

And since all of Wayne’s latest revenue estimates, and spending estimates, and budget deficit/surplus estimates, are based on that critical GDP growth ass-umption, I think it only fair to say that we can write off this entire budget as a(nother) very, very bad joke.

Problem is, the joke’s on all of us.

UPDATE:

A number of my Twitter followers have kindly informed me that I have made an error. Apparently, the RBA chart for GDP that I’ve referred to above is “Real” (ie, inflation adjusted) GDP, and the budget forecast I’ve referred to is “nominal” GDP.

No matter.

Given the falling Terms of Trade, the closing of that “huge” mining investment pipeline, and a likely incoming Coalition government purportedly looking to slash spending and public service jobs, I reckon even a forecast 2.75 (2013-14) and 3% (2014-15) “Real” GDP is highly unlikely:

UPDATE 2:

Thanks to Twitter follower @gregfranksimmo (EDIT: who got it from Greg Jericho, aka @GrogsGamut), the following chart of both “nominal” and “real” GDP clearly shows that nominal GDP has been declining since December 2010, and has actually been below “real” GDP for the past two quarters, while “real” GDP growth is presently barely managing 3% … despite all those wonderful (and temporary) economic “strengths” Wayne has been boasting about –

UPDATE 3:

Business Spectator and unabashed ALP apologist Stephen Koukoulas – he of the recent 8 – 12% house price rise prediction – tells us why the nominal GDP forecast is so important for the budget figures:

The forecasts that matter more for revenue, nominal GDP growth, are similarly understated at 3.25 per cent and 5 per cent growth respectively.

Er…

“Nominal” GDP in the Sep ’12 and Dec ’12 quarters was running below “Real” GDP, at less than 2% per annum.

5% “nominal” GDP in each of the next two years?

Chances of that are, I reckon, somewhere roughly between Buckley’s and none.

Meaning, the government’s revenue forecasts have roughly the same chances of coming to pass.

Tags: budget 2013-14, forecasting, GDP, government revenues, treasury department, wayne swan