From The AFR this afternoon comes news that the Federal Budget is likely to deteriorate further following today’s disappointing GDP results:
Annual growth in GDP was 2.3 per cent. That is below Treasury’s last forecast for growth in the 2013-14 financial year of 2.5 per cent, released as part of the pre-election fiscal outlook in August.
“Combined with other economic data it is clear that the nominal growth forecasts in the PEFO will not be reached,” Mr Hockey said, referring to the pre-election fiscal outlook.
“This points towards a further deterioration in the budget bottom line.”
Mr Hockey said the September figures showed what sort of economy the Coalition had “inherited” from Labor.
“The fact is the economy is stuck in second gear,” he told reporters in Canberra on Wednesday.
“We have inherited an economy with below trend growth, rising unemployment and a deteriorating budget.”
As noted earlier, there was one bright spot for the Government in today’s GDP release, with nominal GDP – the dollar value of what’s produced and earned across the economy and also the measure that drives taxation revenue – lifting on the back of a 7% average decline in the Australian dollar (trade weighted index) over the September quarter:
That said, the ongoing decline of the terms-of-trade will continue to place downward pressure on nominal GDP and will require ongoing offsets in the form of a devaluing Australian dollar.
