If you need a reliable, accurate, thought provoking and informed economic forecasting at both local and international levels, look no further. Informed by Stephen's exceptionally broad experience and background, his
The Australian economy is like cricketer Shane Watson – looks pretty good most of the time, occasionally inspires with a terrific performance, but then falls short of what is required when the going gets tough. The performance is not so bad as to give up with a downgrade or capitulation exit, but it is frustrating nonetheless to watch month after month generally disappointing results.
The GDP result today locked in two and a quarter years where real growth has been below trend. Real GDP rose 2.5 per cent in the year to the December quarter 2014 meaning that for the last nine quarters, annual GDP growth has been stuck between 1.9 and 3.0 per cent with an average growth rate of a miserable 2.4 per cent. The long run trend growth rate for Australia is around 3.2 per cent which means that the economy could have grown almost 1 percentage point faster for the last two years without there being any threat of rising inflation.
I am not sure if the RBA knows that but I will try to tell them next week.
In other words, there is a large and growing output gap which is showing up in a rising unemployment rate and very low inflation.
It appears the Abbott Government has given up on cutting the budget deficit and slashing government debt.
In retaining the leadership of the Liberal Party, Tony Abbott has dropped a range of his existing policies that were aimed at reducing government spending and lifting government revenue, and he has added a few extra spending items into the mix.
Even before these policy reversals, the evidence was mounting that the budget deficits were getting bigger and the growth in the level of government debt was accelerating, in part driven by the Abbott Government's own approach to fiscal policy.
Almost halfway through their first term in office, the Abbott Government has failed in its commitment to reduce the budget deficit and cut government debt. In fact not only has he failed, but the reverse has happened. The budget deficit is getting bigger and the level of government debt is rising.