Morrison’s Budget of Lies crashes again

Wednesday, 1 June 2016

The 12 month Singapore and Chinese futures markets for iron ore both crashed to new lows yesterday. Give the volatility in the Chinese market I prefer to use Singapore and on that measure the spread to the Budget of Lies forecast of $55 hit a new wide of -$21.85:

I expect that by the election the spread will be out to -$25 per tonne, a full 45% drop on the Treasurer’s fantasy outlook. Here is Treasury’s own sensitivity analysis for what this means:

Taking the most reliable futures market in Singapore, on iron ore alone the Budget is currently mis-pricing nominal GDP by some $27 billion and tax receipts by $8 billion per annum.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.