The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Wednesday, May 11, 2011

Faceless Economist: "this is not an inflation busting budget"

The high-profile but otherwise faceless interest rate strategist, who blogs over at Ricardian Ambivalence, offers the following Budget summary (click on the link for more detail):

"The truth is that this is not an inflation busting budget. Spending rises relative to the 2010/11 MYEFO — IN EVERY YEAR.

And while it falls as a proportion of GDP, it’s higher relative to the 10/11 MYEFO baseline — IN EVERY YEAR.

Fiscal policy has been more stimulatory than expected when the 2010/11 budget was framed — as Treasury underestimated depreciation and capital loss allowances. As a result, they overestimated the average economy wide tax rate in 2010/11. Think of it as an accidental tax cut.

Despite higher nominal GDP and higher revenues than forecast in the MYEFO we do not get a better outcome. So much for banking any improvement!

We ought to be saving more of this bonanza, and not being timid about closing down wasteful GFC spending programmes (or the wasteful programmes we started up before the GFC). After all, this is a full employment economy."