Wednesday, 5 November 2014

Polling and the Government

The inimitable Kevin Bonham has just written on the latest polling where he admits his previous thoughts were wrong. i.e. the polling was coming back to the government and the budget blow-out was over.

My thoughts are thus:
The ALP was essentially defeated by the exchange rate. When the Terms of Trade fell quite a bit the exchange rate remained high which thus condemned nominal GDP to being extremely weak.

If the exchange rate eventually falls to rational levels this will more than offset the negative influence on nominal GDP from the falling terms of trade and the government will comfortably win the next election.
If the exchange does not fall to these levels then all bets are off.

For what occurs when the nominal economy is weak then read the-investors-guide-to-national-accounts by Skeptikoi