This article first appeared on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/its-time-end-strong-economy-propaganda-230414837.html 

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It’s time to end the “strong economy” propaganda

For the last year or so, it has been obvious to anyone with an open mind that the economy is in trouble. Unfortunately, the government and the Reserve Bank not only ignored this growth slump, but they ran a propaganda campaign saying the economy was “strong”, that unemployment would keep falling and wages growth was poised to pick up.

It might have been politics that lead the RBA and Treasury to this view with the recent election swinging on the economic credentials of both major parties. Ahead of the election, the RBA and Treasury were loathe to undermine the government with an honest assessment of the rapidly spreading economic problems.

It is possible that the forecasts were a simple error, which sometimes happens when an external shock hits the economy.

Either way, things are so bad in the economy right now that forecasters are rushing to out-do each other on how low interest rates will go in this cycle. Some are canvassing negative interest rates, printing money or the need for a fiscal policy boost if the economy remains in its economic funk.

Time will tell.

The range of forecasts that where regularly produced by the government (Treasury) and the RBA up until very recently were unambiguously optimistic. The forecasts ignored all hard data on the economy, which suggests it may have been a political strategy to remain upbeat, rather than it being a clumsy forecasting error.