I am concerned about a report in the AFR that
The incoming Abbott government is considering delaying until late January the mid-year budget update to avoid hurting confidence over the Christmas shopping season. Treasury briefings over the past week have driven home to the new government the risks to the economy. The economic forecasts and predictions contained in August’s Pre-Election Economic and Fiscal Outlook are already obsolete, the new government has been told. …
Senior sources said Treasury would like to release the Mid-Year-Economic and Fiscal Outlook (MYEFO) in November but the new government is pushing back. Under the rules it does not have to release the outlook until the end of January and this option is under consideration. If the MYEFO is delayed, it would contradict a commitment Prime Minister-elect Tony Abbott gave in his speech to the Liberal Party election campaign launch when he promised a MYEFO within 100 days of being elected. “The true state of Labor’s books will be revealed,’’ he said.
This seems all odd to me.
- If it were true that the economy was getting worse, delaying the release of MYEFO until after Christmas so as to avoid hurting confidence for Christmas would do precisely the opposite. In fact it would fan uncertainty and make people think the economy is actually worse still. The very delay of MYEFO would damage confidence in the economy. It is like talking down the economy.
- If true that the economy is so bad and PEFO is ‘obsolete’ what does it say about Treasury forecasting? Don’t forget that the 2 August Economic Statement took $42 billion (over three years) off the forecasts from the 14 May Budget. This in the space of 80 days. So is there to be another major downward revision?
Now I thought that Labor had deliberately made the Economic Statement too pessimistic to ‘force’ or ‘encourage’ Tony Abbott into even larger budget cuts. Then, if re-elected, Rudd would enjoy the benefits of a stronger than anticipated economy.
But if it is true that the economy is getting worse than anticipated at the Economic Statement / PEFO it is not news that should be hidden from the public. But I haven’t seen any recent data that would support such a downward revision.
There may be sound reasons for delaying the MYEFO, but surely not because of the state of the economy.
Joe Hockey and Mathias Cormann should have a press conference stating they will not be playing games with MYEFO. If the economy is deteriorating people need to know that – it is the height of fiscal irresponsibility to encourage people to spend when they may need to save for bad times around the corner.
Mind you, we don’t know the source of the AFR report. It could be one of the incendiary bombs left by Swan and Bowen and dropped by their loyal servants in Treasury.