It’s a mug’s game to quibble with the Treasury forecasts that underpin the Budget revenue and outlays estimates. This hasn’t stopped many people from taking cheap shots and as far as I can see, the only focus of these criticisms of the forecasts is on downside risks. Even the Crikey editorial yesterday expressed pseudo concern that if GDP undershoots the Treasury forecasts by 0.5% over the next couple of years, the budget deficit will be $14 billion or so larger than projected. So what?
What if GDP growth is 0.5% stronger over the next two years? Well, that’ll see a $14 billion reduction in the deficit and a return to surplus at least a year earlier than currently projected.
But who really knows?
Those lining up for the media profile expressing doubt about the robustness of the Treasury forecasts better watch out. They are openning themselves to detailed scrutiny of their own forecasting records, a task no doubt that Treasury is gleefully pursuing. The “dirt file” on the forecasting record of all those bagging the Treasury forecasts is likely to be a big and detailed set of papers. It is even possible that Treasury Secretary Ken Henry will use his upcoming speech to the Australian Business Economists to tip the bucket labelled “forecasting accuracy” over half the audience. He did just that in the lead out of the 2000-2001 slowdown to great effect.
The focus of the Budget should not be a petty quibble over what are perfectly reasonable economic forecasts. Rather it needs to be judged on whether it is a Budget that, in the context of the worst global environment in more than 70 years, has helped to limit the depths of the recession, cap the rise in unemployment and set Australia on a sound footing to take advantage of the recovery when it comes. On those criteria, it is a success.