In a week in which losing the plot became commonplace in Canberra, take this extraordinary quote from David Gruen, one of the Executive Directors at the Treasury:
The idea that in the face of the largest investment boom we’ve ever seen that you would ignore exports and focus on demand and claim that’s a recession belongs in comic books, not serious newspapers.
Hmmm. Let’s look at the facts, David.
- The definition of recession is arbitrary, as Sinc’s post this week has shown. Using the rate of unemployment, which many people would relate to, unemployment in Western Australian has risen from 3.5 per cent in June last year to 5.2 per cent in April this year. On the basis of these figures, the state is already in recession, with the rate of unemployment having risen by more than 1.5 percentage points in less than 12 months.
- State final demand in WA fell by nearly 4 per cent in the March quarter. We are talking a serious offset in terms of net exports to shift this figure into positive territory.
- State final demand in WA rose by 0.5 per cent in the December 2012 quarter. Net exports would have added to this figure.
- On the basis of an educated guess about movements in state output, WA is not in a recession yet, although this latest figure does suggest that a significant economic slowdown is afoot.
So comic books? I think not. Just some serious analysis by newspapers rather than the fairytales coming out of Treasury.
On another point: did you read about Martin Parkinson now confirming that the overly optimistic outlook for the TOT were locked in six weeks before the budget – you know, TOT to fall by 3/4 per cent in 2013-14 and 1.5 per cent in 2014-15 (yes, hilarious) – and he now feels that these projections are too rosy?
- Where does this leave Parkinson’s feisty defence that a PEFO released immediately after the budget would have contained the same (incorrect) forecasts of the budget? (Yes, I am still having a major chuckle about the last PEFO. Who needs comedy shows, or should that be comic books?)
- Surely Treasury have developed systems that allow the projections/forecasts to be revised right up to a few days out from budget day? In the old days prior to modern technology, there was some excuse for out-of-date forecasts being used in budget. Not now.