May 12, 2014

Iron ore drags down terms of trade for gloomier economic outlook

The outlook for Australia's iron ore producers is dour. That drags down our terms of trade, and suggests Joe Hockey's gloomy economic forecasts can be believed.

For some time now, Treasurer Joe Hockey has taken flak for his Mid-Year Economic and Fiscal Outlook and its dour forecasts for Australian growth and the budget outcomes. These criticisms have been very premature and generally analytically inadequate. Present indications suggest Hockey’s MYEFO was close to the mark and, moreover, that any upgrade to forecasts would leave the federal government hostage to increasingly hostile fortunes.

Over the weekend the Department of Finance released its monthly tracking of the government’s cash flow, and it showed the budget deficit is ahead of its projections. Unemployment is at 5.8% versus the 6% expected for the June quarter, and the economy is probably slightly ahead of the 2.5% growth forecast as well. Nominal GDP is at 4.8%, ahead of 3.5%.

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One thought on “Iron ore drags down terms of trade for gloomier economic outlook

  1. stephen Matthews

    says David:
    Blood will flow through the gullies of the Pilbara

    Please ignore this fatalastic Hanrahan who enjoys high office at Macro Economics .
    He’s been down on the Aussie iron ore industry for the past 3 years .
    he’s been wrong everytime.

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