Friday, September 07, 2012

Beyond the downside

MOBIE released its September 2012 Quarterly Labour Market Report [PDF] yesterday, showing unemployment is expected to remain above 6% until 2014. Commentators are pointing out this is well above Treasury's projections in the Budget [PDF, p. 3], but its worse than that. MOBIE's projections are now worse even than Treasury's downside scenario [PDF, p. 4], which showed unemployment at 6% in 2013, and 5.7% in 2014.

But apart from showing that once again Treasury's projections are political trash designed to sustain the government's optimistic narrative, this is going to have consequences for the government's dream of a surplus in 2015. That dream was already looking pretty shaky, as it rested on magical thinking about historically high wage growth during a period of sustained high unemployment. But I think its pretty clear now that it just isn't going to happen. National's cuts have crashed the economy and dug us a deeper fiscal hole - just as they did in the 90's.