Treasury's economic forecasts show 'very different level of optimism' to RBA

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[00:00:00]Let's get Ross Greenwood now on this and open it up for a broader discussion. But Ross, what we're seeing is a very different level of let's say optimism in these numbers. What we've been hearing from the Reserve Bank.

[00:00:13]>> So that's right. And depending on which way this goes is going to depend on the outcome and therefore whether either the government has to find more cuts or whether it has to raise taxes even further. And so we can show you this by basically showing you first up the difference in the economic growth forecasts of the Reserve Bank a and the treasury which have modeled this for them. So if you sit there and just basically have a quick look at this, what you can see is Treasury this year says the economy will grow at 2 and a4%.

[00:00:41]The Reserve Bank says about 1.9. Now I've done a rough back of the envelope calculation on that. I reckon that's the best part of 10 billion. So $10 billion which is bigger than any of the other investments that they've made, the spending they've done. So next year it goes, the Treasury says it'll slow down 1 and 3/4%. The Reserve Bank says 1.3%.

[00:01:00]That's a big difference. And then the following year the Treasury says it'll rebound at 2 and a/4% and the Treasury says well it's going to be anemic 1.4%.

[00:01:08]So you know you get that and you realize that there is a gulf between the Reserve Bank and what is basinally the predicating this budget. If we go further forward, we can say it on something else as well. And so when the um when the Reserve Bank and also the the Treasury forecast the unemployment rate right now, again, they're at odds.

[00:01:28]So because this all feeds into the amount of money the government's going to collect because it collects half of its money from P A taxpayers. So the Treasury says 4 and a/4%, RBA says 4.2%.

[00:01:40]They're similar. Next year, Treasury says 4.5% unemployment and RBA 4.4. 4 following year RBA 4.7 and Treasury 4.5.

[00:01:50]But it really shows up in dwelling investments. Now this is about building homes. Now this is where Kieran and I basically had a bit of a yarn about this and watch this. So have a look at this.

[00:02:01]So dwelling investment Treasury says it will grow at 5% this year, 4% the following year, 3 and a half% the following year. Look at the Reserve Bank. 3.8% 8% this year, 1% the year after, minus 1.1% the year after that.

[00:02:15]What do you think happens when you got inflation pushing up the price of building and you got interest rates going higher? Do you reckon builders are out there wanting to build as many houses as they possibly can? Of course they don't. So that is the fundamental, you know, sort of if you like conflict that is sitting in this budget that's being delivered tonight.

[00:02:31]>> The real difference between the Treasury and the RBA. Laura, I I wonder when you're looking at these numbers as we sat in the lockup, do you think Ross has given us the very neat economic comparison, what's your political instinct tell you? Can they make this fly this document?

[00:02:48]>> Well, the depends what the opposition do, but uh I think it's very cynical and they're relying particularly on things like the CGT. It is so complex that I think they're relying on Australians not to understand it. Um that's the first thing I would say but I would say on the CGT as well once they consult with business and Jim Charas has already said this in the lockup that yeah we know that business are concerned about this we're going to consult. I predict tonight that the CGT changes that we see once they start consulting with business are going to look very different because they are too complex. It's got you know GST birthday cake vibes with candles about it doesn't it? The other thing here is it does show overall that this government is still so overrelyant on income tax for revenue and there is no sign that they can ever get away from That