Tuesday, 7 February 2012

Is Something Brewing in the Economy?

In the last few days, we’ve seen a hardening in the commitment to a 2012-13 Budget surplus from the Prime Minister, Ms Gillard, the Treasurer, Mr Swan and the Finance Minister, Ms Wong.

Why?  Has the official family (Treasury, the RBA and Finance) revised up their collective assessment of growth, employment and the other key parameters?

Are the tax revenue and government outlays numbers more positive (for a surplus) than estimated at the time of MYEFO in late November 2011?

Note that a 1.0% forecasting error (a tiny misreading) on revenue is worth around $3.5 billion – and if it goes the “right” way, the surplus in 2012-13 will be a slam-dunk.

What is also interesting is that the RBA bucked expectations yesterday for an interest rate cut and in doing so, suggested growth is near trend and unemployment is stable.  Does it reckon the economy is better than feared late last year?  Will interest rates be on hold rather than be cut for months ahead?

Just thinking out loud.

1 comment:

  1. Maybe it didn't notice the participation rate of employment dropped dramatically.

    I'll be interested to see ABS next UE figures given Roy Morgan's current ones. There's the potential that Roy Morgan's are a huge outlier.