Treasury Secretary Ken Henry won’t forget the first week of February 2008 in a hurry.
At 2.19pm on Monday, Alan Kohler published a story on Business Spectator which opened as follows:
Treasury Secretary Ken Henry is firming as a near certainty in the race to replace the retiring Peter Shergold as head of Department of Prime Minister and Cabinet, effectively the chief of the Australian public service.
After a few hours contemplating this revelation, Henry then woke up on Tuesday morning to a column by former NSW auditor general Tony Harris accusing him of being a Costello inflation puppet in The AFR.
All of this would have made for some very interesting chat around the board table at the Reserve Bank in Sydney on Tuesday as Henry presumably agreed with his colleagues that official interest rates had to go up again to tame the same inflation tiger which he had supposedly failed to warn Peter Costello about.
Alas, all of this was wrong. Kevin Rudd yesterday ruled out Henry’s move to PM&C and Terry McCrann correctly pointed out in a feisty Herald Sun column that Tony Harris had his facts wrong in the following terms:
The basis of the Harris article was that the MYEFO – the Mid-Year Economic and Fiscal Outlook – had benign inflation forecasts.
“Inflation is forecast to be 2 per cent in 2007-08 and 2008-09. In through-the-year terms, inflation is forecast to ease to 2 per cent in the June quarter of 2009,” MYEFO disclosed according to Harris.
The only problem with this is that it is completely untrue. The MYEFO had inflation forecast at 2.75 per cent in both 2007-08 and 2008-09.
This also means Crikey’s lead story yesterday was wrong, although we can blame Harris.
McCrann argues that the inflation genie came out of the bottle with the release of the September CPI on October 24 – after Treasury gave Costello those forecasts. However, Costello was still gloating about having inflation covered in his 24 October doorstop.
It is not just McCrann hopping into Harris. One of the nation’s leading economics writers sent through the following email yesterday:
I don’t know what Tony Harris was quoting this morning, but it was not (NOT) Treasury’s midyear outlook update 2007-08. See p19 of the document (text) or p4 (panel). It left its inflation forecast unchanged at 2.75%, for both 07/08 and 08/09. Had it cut the inflation forecast to 2%, it would have been all over the front pages the next day. I dunno what Tony’s on about. I’d always thought his columns well informed. This one is crap.
The AFR really deserves a kick up the backside for not correcting the Harris blunder today. When a credible commentator does this in a credible publication it causes a snowball effect, such as our lead yesterday and the mention on PM last night.