Tuesday, 27 February 2018

The budget is improving, maybe

Via the Kouk it appears the budget bottom line is improving.
He thinks the deficit could fall to $15 B. Thus the deficit falls from 1.1% of GDP to 0.8% of GDP.  The deficit on an accruals base is around -  0.5% of GDP Most economists would say it is in balance  when it is + or - 0.5% of GDP so at present we are almost there.

A few points
  • All the improvement roughly has come from Receipts.
  • Al the improvement has come from the cyclical side of the budget not the structural side!
  • the budget was in balance on an accruals based system which IMHO is the only was to look at the budget which means it was in balance.
  • The projections will be healthier and thus look forward to some spending proposals  from a government likely to lose an election and from an opposition not wanting to lose at the wrong time in the business cycle!
You cut the Structural deficit as quick or as low as Nominal GDP is rising. Now is the time to start on reducing it without much affect on the overall economy.

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