Via Jacob Greber today:
The Reserve Bank of Australia and Treasury say economic growth will accelerate to 3 per cent this year from a disappointing 2017 average of 2.1 per cent. As a forecast, it sits at the outer-edge of most market economists’ estimates.
And while gross domestic product is a relatively crude guide to whether federal budget and household wage expectations will be met – incomes and employment are much more relevant – neither institution is showing much inclination to back away from the 3 per cent number.
Since when did with the RBA or Treasury give up on 3% growth? Futureboom is always looming.
Sadly for them, and Australia, this chronic over-estimation of prospects is a key input into our political chaos. Ever since the end of the mining boom, these two agencies have been hopelessly over-bullish and as a result have set up their political masters for polling destruction by raising expectations for economic and Budget repair when disappointment is baked-in. The pollies wear the resulting anger every time.
To wit today, from a newly minted David Crow at Domainfax:
Mark your diaries: an election on Saturday, May 18, 2019, is quite feasible. There are early ideas within the government about how to make it work, such as navigating key obstacles like the NSW state election early next year and the recent tradition of releasing the federal budget on the second Tuesday in May.
…This may help the government fight on its strong suit, the economy, because it would bring forward the May budget and turn it into a more focused economic statement at the launch of the campaign. Tax cuts would be a big part of the package and the government would have an opportunity to offer a better answer on wages growth. Howard made a strong start to the 2007 campaign with an economic statement and a big tax package.
This means the government has to manage expectations for the coming budget on May 8, which ministers understand will not be a pre-election budget overloaded with sweeteners. While it may have room for personal tax cuts, these may be modest and offered as a down-payment on more substantial changes to come next year.
Except what will come instead is a renewed terms of trade shock as China slows, more poor Australian growth, either big Budget cuts or a sovereign downgrade, further weakening in incomes across the economy, and a new Australian Government.
Futureboom only guarantees future bust.
