Wednesday, 9 April 2014

I wish Joe Hockey was consistent

I still cannot work out Joe Hockey.

Is he going to bring down a contractionary budget or not?
One minute he says he is and then the next he says that would lead to lower economic growth. ( He is probably right there.)

As far as I am concerned given nominal GDP is forecast to be 3% then imposing a contractionary budget on top of this would be crazy. Ricardian Ambivalence is in favour of this but would want monetary policy to offset fiscal policy.
I am a little sceptical about how much monetary policy could do this under present conditions.Thus I think the risks are too great.
I would let the automatic stabilisers do their job and impose contractionary fiscal policy when the economy will benefit from it.

We will find out next month but I do wish Joe Hockey would cut out his mixed messages.