I was asked, by e-mail, about a Sinclair Davidson article yesterday.
Naturally there are a number of inaccuracies as you would expect from Davidson.
Apparently debt is soaring. But hang on the Commission of Audit found on the WORST case scenario net debt as a % of GDP would get to 17.5% of GDP.
Hmm that doesn't sound like soaring debt does it?
He believes that Hockey should have brought in a much tighter budget. Hockey has backloaded most of the spending and tax decisions. The reason for this is the economy is already weak. It is logical that fiscal consolidation occurs when the economy is stronger.
The declining Terms of Trade is putting pressure on the Nominal GDP level.
The Last time a treasurer put forward a tight budget when similar circumstances eventuated the budget made the economy much weaker.
That Treasurer was Wayne Swan. His budget, easily the tightest in budgetary history, actually detracted 0.7 percentage points from GDP. ( We must always remember Davidson said on the day after this budget he and another colleague said the budget was expansionary!!)
the RBA believed Hockey's budget would add around 0.4 percentage points to GDP.
So like an old fashioned communist Davidson never marks his beliefs to market. He continue to believe in them even though he is almost always wrong.
That is also the reason he does not allow varied comment at his site. He and the others have thin skins and cannot debate. They never venture out from Catallaxy to make comment because when they do they get humiliated.
They never learn!
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