I am not sure it is really helping the federal government, all this discussion about will there or won’t there be a budget surplus in 2012-13. But I guess it is entirely of their own making.
I think what is scary is the Prime Minister’s belief in the MYEFO forecasts as providing the basis of her on-going determination (belief) the delivery of the budget surplus.
Where are her advisers in all of this?
MYEFO downgraded the nominal GDP forecasts from 5 to 4 per cent. The problem is that according the latest nominal accounts, nominal GDP is growing at less than 2 per cent. Given that it is nominal GDP that is key in driving tax revenues – leaving aside the issue of the MRRT (see below) – the data are already in to show that the surplus will be missed.
The irony is that the MYEFO on which the Prime Minister places so much store provides some handy sensitivity analysis on the impact on the cash balance of a one percent fall in nominal GDP. For 2012-13 ,the impact is negative $2.8 billion and for 2013-14, it is negative $6.7 billion.
On the MRRT, the word on the street is that a big fat zero, or close to, will be the revenue outcome for 2012-13. (The gossip is that a small Japanese company has opted to pay a small amount thinking the big three would come good for policial economy reasons. Wrong.)
In reality, the time for backpeddling (and fast) has already past.