The real purpose of putting out the Economic Statement on Friday was to hem in the Treasury in terms of the release of PEFO in 10 days time… In all likelihood, the PEFO estimates and projections will be identical to those in the Economic Statement. How could they be otherwise? But there are some real issues in that statement – in particular, the internal inconsistency of the figures. Take 2015-16 – unemployment falls from 6 1/4 per cent from the previous year to 5 per cent. This is a very big fall for a 12 month period, but would only happen if the economy were going gangbusters. But, here’s the rub – the economy is only going to be growing at 3 per cent. This just does not make any sense. Unemployment cannot fall by this amount. And what about the assumption in the Economic Statement that ratio of total receipts will rise from 23.2 per cent last financial year to 24.8 per cent in 2016-17. As if – the last time, the ratio was remotely near this figure, there was a series of special factors including the onset of the mining boom, rapid credit growth and above average capital gains tax receipts. NONE of these factors will be repeated – they are not expected to be repeated as outlined in the statement. The bottom line is that if all the PEFO does is mimic the Economic Statement, then Treasury will have to hang its head in shame. The ES was a shoddy document put together for essentially political reasons. We should expect better with PEFO.
Posted on: Mon, 05 Aug 2013 00:17:22 +0000
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