Today, Treasury Secretary (Dr.) Martin Parkinson gave the now traditional post budget speech to the Australian Business Economists.
The speech was mostly a defensive affair, with Dr Parkinson battling the ghost of Warrick Mckibbin and the spirit of Paul Krugman. I was somewhat sceptical of the ‘multiplier’ going in, and so am relatively un-worried about the fiscal drag coming out – in any case, i will take smaller government, however i can get it.
There is no doubt that it is going to be a brake on demand growth in the short run, and for those that are having trouble accounting for the shuffling between years, we got an estimate from the Treasury Secretary. In answer to a question, he said that the brake on demand from the fiscal consolidation would be around 1% in 2012-13. The way he answered the question suggested that fiscal drag would continue somewhat into 2013-14.
More intersting to me, however, was this chart of GST revenues against the ABS’s estimate of the consumption of GSTable goods and services.
The blue line is a prior ABS estimate of the consumption of taxable goods and services. The grey line is the Commonwealth’s GST tax reciepts. You can see that the ABS had formerly overestimated the strength of consumption, but has subsequently revised it down toward GST reciepts (the red line is the latest estimate).
Now, we once again have a divergence – the Commonwealth’s GST reciepts show no growth, which suggests similarly weak growth in the consumption of taxable goods and services. The ABS estimate is ~5% yoy.
My sense is that the GST reciepts are, once again, a better guide to what is actually going on – they are a better fit with survey data, anecdotes, and company reports.