Thursday, May 24, 2012

More nonsensical projections

Today's budget included the Budget Economic and Fiscal Update, the government's forecast of economic performance, which underlies its projections of the government books. And as usual, it has some heroic assumptions about unemployment and wage growth [PDF, p. 3]. Unemployment will apparently remain above 5% all the way to 2015. Meanwhile, wages are expected to grow by nearly 4% a year over that period.

As I've pointed out before, this flies in the face of the historical record. We don't get that sort of wage growth without unemployment below 4% and labour laws designed to promote collective bargaining. So, Treasury is basically publicly dreaming - just as they have every other Budget.

So what does this mean? I think the table below, from the Risks and Scenarios chapter [PDF, p. 9] speaks volumes:


Basically, if they fail to meet those wage-growth dreams, then that's their 2015 surplus gone. And given that they are already planning to enact "reforms" to crush collective bargaining, I think we can say it now: there will be no surplus in 2015.