Monday, June 29, 2009

Forecasting Australian GDP II

In my last blog I questioned the projections published in the Federal budget documents. Interestingly the OECD has just released its own set of predictions.

The OECD predictions for 2009 and 2010 are -0.4 and 1.2 respectively. The budget projections for 2009/10 and 2010/11 are -0.5 and 2.25. The latest IMF GDP forecasts are –0.5 (2009) and 1.5 (2010). Evidently the budgeted projections are significantly larger than IMF and OECD predictions.

Once again, the real issue is, what impact will smaller growth rates (which are much more likely) have on the economy?

I am not aware of a detailed answer in existence, however smaller growth rates will mean the debt will be larger and around for longer.

Although the prediction periods differ slightly it does not invalidate the concerns outlined above.

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