Weooo, weooo, weooo. The Pascometer is warning that:
It’s getting harder and harder for the Treasurer and Minister for Gloom, Joe Hockey, to keep faking it. No matter how much he scowls, the evidence keeps mounting that his MYEFO (mid-year economic and fiscal outlook) forecasts were a crock.
The latest exhibits for the defence of the Australian economy are today’s building approvals and balance of payments numbers. Our net goods and services surplus soared 30 per cent to $10.75 billion in the December quarter. Dwelling unit approvals in January rose by 1.3 per cent in trend terms and 6.8 per cent seasonally adjusted over the previous month to be ahead a whopping 28 and 35 per cent respectively over the year.
And these are just the latest numbers showing that the mid-year economic and fiscal outlook was overly pessimistic.
The other measure that’s clearly off the chart at this point is cherry-picked data. The measures that The Pascometer cites are indeed travelling solidly. And there is evidence that Government revenues are ahead of expectations even if costs are as well.
What the counter-contrarian signal generator known as The Pascometer is really warning of us, however, is that the Budget has an immense hole elsewhere in its 2014/15 assumptions, business investment, which does not get a mention.
The MYEFO estimated that the 2014/15 year would see a -2% fall in private investment, but the recent ABS survey for the same period described a fall of -17%, which can be rounded down to -11% with some generous assumptions about realisation ratios.
Here are the MYEFO assumptions:
When I first reported on this myself I read it wrong, assuming that the number was in reference to proportion of GDP, given that is the only way it would make sense. But, apparently, it is only a simple year on year figure and is therefore rather behind the curve. Business investment drives jobs growth and the employment forecast for 2014/15 is only a smidgen higher than today at 6.25%. There is no way the capex figure and the Budget employment forecast can both be right.
Officials may be right and investment intentions may surge in a wildly unprecedented manner in the months ahead, perhaps even on The Pascometer’s dwelling approvals, but, as of today, the Budget has a gigantic smoking orifice at its heart and the only thing that Joe Hockey is faking is how he can mange the fallout.
Weeooo, weeooo, weeooo.
