Monday, 26 November 2012

Know your Subject

A person called Samuel J writes about why the budget should be in surplus here.

Unfortunately neither he nor anyone at that blog have any idea of the subject they are attempting to talk about.

He in essence makes four points.

  1. There is strong employment growth,
  2. There is record Terms of trade
  3. There is strong economic growth and
  4.  he also asserts NAIRU has increased by 0.5 percentage points.

  • Firstly employment growth is not strong. If it was strong unemployment would be falling and the employment to population ratio would be rising.
  • The Terms of trade are not at record levels. Even when they were high taxation never got to levels we saw under the previous government as we has seen before. Obviously Samuel has never looked at a budget or MYEFO paper. As we saw last time tax revenues are at levels we have seen since the early 90s.
  • As we have seen previously it is NOMINAL economic growth that it important to budget numbers not real economic growth. at present real GDP is running above trend but nominal GDP is running below trend.
  • Treasury has not made any statement anywhere that NAIRU has risen.If it had the RBA would not have cash rates where they are.
One might say the writer is the Tahir of blogging on this record but I couldn't possibly comment.