Monday, 15 December 2014

So what is Australian Treasurer Joe Hockey telling the country in the December 2014 Mid-Year Economic Outlook (MYEFO)?

What has the implementation of the Abbott Government's ideologically-driven economic policy left Australian families and businesses facing for the rest of its term in office?

For an in-depth look at the nation's prospects go to the MID‑YEAR ECONOMIC AND FISCAL OUTLOOK 2014‑15.

For the time being here is the briefest of outlines:

The December 2013 MYEFO stated that tax receipts had reduced by more than $37 billion for the period 2013-14 to 2016-17 – now total taxation receipts have been revised down by $6.2 billion in 2014‑15 and $31.6 billion to 2017-18, bringing the total write down in tax receipts since the Government was elected to over $70 billion .

In December 2013 company tax receipts were revised down by $180 million in 2013-14 and $7.1 billion across the four years to 2016-17 – now a mere twelve months later company tax receipts are being revised down by $2.3 billion in 2014‑15 and $14.4 billion over the forward estimates.

Weaker wage and employment growth is expected to continue through to at least 2017-18 - with 2016-17 to 2017-18 wage growth now predicted to be much lower than was anticipated in the December 2013 MYEFO.

The unemployment rate will rise even further than the 6.25% predicted in December 2013 – it is now predicted to reach 6.5%* in 2015 and stay that high until at least June 2016.

In December 2013 the consumer price index for the 2014-15 financial year was supposed to come in at 2 – it is predicted to rise to 2.5.

Despite repeated warnings about a predicted sharp fall in commodity prices which the December 2013 MYEFO failed to fully recognise – by December 2014 there appears to be an element of faux surprise at finding how sharp that fall actually was and a decision made to cast iron ore prices as the arch-villain of the piece.

The December 2013 MYEFO stated that the underlying cash deficit would be $33.billion for 2014-15 – now an underlying cash deficit of $40.4 billion is expected in 2014‑15.

In 2013-14 net government debt was $191.5 billion. Public debt (on which interest has to be paid) will be $425 billion in 2014-15

Total interest expenses on all public debt have risen from an predicted $16.3 billion for 2014-15 in the December 2013 MYEFO to $16.3 billion for the same financial year in the December 2014 MYEFO and, are projected to rise to $19.9 billion by 2017-18.

Unsurprisingly, despite May 2014 budget cuts, further announced cutbacks in federal government agency numbers and public service employee numbers; Abbott Government gross operating expenses are predicted to rise from $119 billion in 2014-15 to $120.9 in 2016-17 and $125.2 billion in 2017-18.

Miraculously and perhaps over-optimistically, in the latest MYEFO the nation's real gross domestic product (GDP) growth has been revised up from 2.5% for the 2014-15 financial year and 3% for the 2015-16 to 2016-2017 financial years to 3% and 3.5% respectively. Nominal GDP has also been revised up.

In the face of all this Joe Hockey is telling the world that he will now have the budget back in a very small surplus by 2019-20. Presumably if the Abbott Government gets a second term and he remains as federal treasurer.

Hockeynomics at its best.

* An unemployment rate of 6.5% represents in excess of 803,952 Australians without a job and the regular pay packet which comes with it.

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