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Australian Budget enters greatest ever era!

Tuesday 12 May 2015

Joe Hockey wasn’t kidding when he said Australia is entering its greatest ever era. Here are the economic assumptions underpinning the Budget:

From the top, there are two big issues with the outlook. The first is rebounding nominal growth in 2016/17. The basis for this is a forecast bottom and little rebound in the terms of trade:

Note that despite the ongoing falls, the forecast bottom still represents a new permanently higher plateau versus historical relationships. One would have thought we’ve been through enough retracement now for that to be highly questionable but no! To illustrate the folly of this, here is the chart of the previous four Budget’s terms of trade bottom forecasts versus the MB outlook:

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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.