The happy idiots running Australia are entering their final fantasy, via the AFR:
The Turnbull government is betting on a sustained growth tailwind to fund its ambitious infrastructure spending and budget repair plans, raising the risk of failure if the economy fails to shake-off its low-growth, low-income funk.
Treasury is next week likely to forecast gross domestic product growth rebounding to over 3 per cent in coming years, challenging more pessimistic expectations among some economists for a weaker outlook.
…Reserve Bank of Australia officials on Friday issued an upbeat outlook but conceded inflation was unlikely to return consistently to the mid-point of its 2-3 per cent target range until late 2019.
…Budget expert Stephen Anthony slammed the Reserve Bank and likely Treasury forecasts as “unduly optimistic”.
“I could wear 2.5 per cent, maybe 2.75 per cent, but I’m not wearing 3.25 per cent – it doesn’t accord with our lived experience of the last six years. We’re in a different paradigm now and we need to revise what ‘normal growth rates’ are.”
Mr Anthony said it would be more prudent for the Treasurer to acknowledge – as Harvard economist Carmen Reinhart did in an opinion piece this week in – that the likely long-run growth pace of advanced economies has fallen by 1.5 to 2 percentage points.
“That message doesn’t seem to have gotten through to Australia,” said Mr Anthony, who points out that the government continues to anticipate productivity growth of around 1.6 per cent, the average of the past three decades.
Giveaways are everywhere, from The Australian:
Up to 3.5 million people on the age and disability support pensions and parenting payment will receive one-off cash payments to help them cover their energy bills by June 30, the Treasurer has confirmed.
The payments of $75 for singles and $125 for couples were part of the deal the government struck with crossbench senator Nick Xenophon in exchange for his support for business tax cuts.
Treasurer Scott Morrison this morning confirmed the payments would be made before the end of the financial year, in a bid to address increasing electricity prices.
…Mr Morrison said the government would have more to say about the health budget on Tuesday night, saying the government recognised Medicare and the Pharmaceutical Benefits Scheme were critical, but declined to discuss specific measures.
And FHB’s:
First home buyers will receive preferential tax treatment in the budget to enable them to save for a deposit, but caps will be imposed to limit the pressure on house prices and to avoid costing the government too much revenue.
After days of speculation, sources have confirmed the Coalition will introduce its own version of first home saver accounts which will essentially resemble a superannuation account.
First home buyers will receive concessional tax treatment on contributions by being able to salary sacrifice, and the earnings will also be taxed at a concessional rate.
There will be caps on the amount that can be contributed annually and an overall cap on the size of the fund. There will be no age limit on who can set up such a fund but it can only be used for the purchase of a first home.
Well, it’s been this way for six years so why stop now? Laura Tingle is taken in:
It’s politics 101, isn’t it?” a Coalition veteran observed this week. “You break into the vault and steal the other side’s policies that might have been giving them an advantage.”
Prime Minister Malcolm Turnbull and his Education Minister Simon Birmingham not only broke into the political equivalent of Gringotts Bank this week and stole one of the few Labor policies to survive the tumult of the Rudd-Gillard era with a good reputation, it stole the policy’s author – businessman David Gonski – for good measure.
And from what we already know of the themes of the budget, there will be quite a lot more of that on Tuesday night.
The 2017 budget will aim to bury Labor’s policy lead and its corresponding polling edge. But the gravediggers will be having a particularly busy night burying the last remnants of the 2014 budget and perhaps with it that document’s undead author, Tony Abbott.
…The government still has to deal with the huge expectations it has built up about doing something about housing affordability.
There’s clearly a vast range of infrastructure projects to be announced, ranging from roads and railways to energy infrastructure.
It has to formally drop a lot of the so-called “zombie cuts” announced in 2014 and firmly blocked ever since in the budget.
Some of these cuts were in the areas that have now been dealt with this week, with the admissions that the cuts now being pursued would be nowhere near as tight.
That leaves welfare as one of the biggest unknown policy areas to be unveiled on the night.
If Turnbull’s ministers have been able to deliver welfare measures that are as well worked through as this week’s education measures, the success of the budget as a political exercise will be pretty much complete.
Better times, higher spending, everything for everybody. Zero reform. The final fantasy unveiled. Morrison himself offers the final psychodelia:
Scott Morrison’s second budget will show the government’s debt surpassing a record $500 billion this year, as the Treasurer says he has a duty to Australia’s creditors to base the budget on realistic forecasts.
Mr Morrison has told The Australian the improving global outlook is reducing the risks to the Australian economy but is bringing no budget bonanza, as the markets for Australia’s key mineral exports remain volatile.
…“The ratings agencies are important but what is more important are the people sitting in funds around the world saying: ‘Are we going to buy these Aussie bonds or not, and are we going to subscribe or participate in a tender?’
“In an environment where you’re about to clip over $500bn in debt, that is an important part of our financing cost, so we will continue to be conservative in our forecasts and projections.”
“I took the calls about forecast projections in my first MYEFO (Mid-Year Economic and Fiscal Outlook, in December 2015), taking growth down, and we’ve continued to revise that, taking Treasury into a much more modest and cautionary space in terms of our estimates,’’ he said.
Iron ore was projected to fall from $US68 a tonne (excluding freight) to $US55 by September this year.
“We were proved absolutely right with commodity prices in MYEFO,” Mr Morrison said.
“When the prices shot up, I remember reading plenty of commentary that the budget is now saved by commodity prices, but you have to understand the volatility of these markets if you want to be taken seriously by your external creditors.
Here’s my guess what the Budget outlook is for the terms of trade versus what’s actually coming:
The Coalition, Treasury and the RBA have dropped acid. The economy is in the eye of a cyclone, not enjoying a breath of fresh air. By year end, the disastrous iron ore market will be in the $30s and the Budget outlook destroyed. Mining investment will still be falling. Dwelling construction will join it. The car industry will be shut. House prices will be stalled and non-mining investment drying up. Growth will be set to tumble and unemployment to surge into 2018:
If there was an election due in July, from the point of view of political cynicism it might be understandable that the tripping trio deliver a fantasy Budget. But given the next poll is not due until until deep into 2018, why raise expectations today when reality is going to mug them long before the poll?
While Do-Labor Malcolm is busy slipping on another phony mask to save his empty skin from the ever mounting Newspoll count, Coalition strategists might want to consider the damage that will be done to the party’s core electoral brand of ‘good economic management’ when the Budget crashes into farce and the AAA rating is stripped straight into the teeth of the next election.
