Latest / Best of Business / Brad Olsen: Infometrics Principal Economist on the latest stats revealing Government spending has dropped

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Brad Olsen: Infometrics Principal Economist on the latest stats revealing Government spending has dropped · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: Now, the government's financial statements are out and it's not
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  Speaker 2: looking that great. Debt is now at forty one point
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  Speaker 2: eight percent of GDP. It's gone up in the last year. Obviously.
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  Speaker 2: The operating deficit obergal X is sitting on nine point
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  Speaker 2: three billion dollars. That's higher than last years which was
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  Speaker 2: eight point eight billion dollars. Revenue is up, expenses is up.
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  Speaker 2: Of course, Finance Minister Nicolaullis managed to spin it in
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  Speaker 2: a good light.
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  Speaker 3: Health and education, but as a proportion of the overall economy,
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  Speaker 3: Crown spending is reducing.
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  Speaker 2: Brad Olson is Info Metrics principal economist and with us
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  Speaker 2: Hi Brad good evening. Obviously not great, But how much
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  Speaker 2: of this should we give them slack fall because of
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  Speaker 2: the state of the economy.
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  Speaker 3: Well, I think more than just the state of the economy.
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  Speaker 3: The challenges is that a lot of these numbers were
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  Speaker 3: baked in by previous decisions and unless you were going
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  Speaker 3: to see some really really fundamental changes, and that would
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  Speaker 3: probably have to affect the likes of you know, different
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  Speaker 3: welfare and social spending, health and education. You probably couldn't
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  Speaker 3: do too much of a turnaround job too quickly. So
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  Speaker 3: the fact that some of these indicators have either stabilized
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  Speaker 3: or started to move slightly in the right direction. Yes,
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  Speaker 3: it's not enough yet, but some of them. I mean,
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  Speaker 3: you look at the likes of spending now a smaller
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  Speaker 3: percentage of GDP. You mentioned the debt figure up six
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  Speaker 3: point seven billion dollars from last year, but three point
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  Speaker 3: five billion lower than was forecast in the budget. And
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  Speaker 3: the fact that it stabilized at forty one point eight percent.
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  Speaker 3: The first change, and it will first part of a
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  Speaker 3: turnaround is at least leveling things out and stopping them
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  Speaker 3: going higher. So I guess on that front there is
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  Speaker 3: a bit of a change, But clearly there's still a long,
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  Speaker 3: hard slog for the government books to get back into
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  Speaker 3: a more reasonable position. That's probably going to take quite
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  Speaker 3: a few years, until probably the twenty thirties.
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  Speaker 2: But why is the operating deficit still widening?
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  Speaker 3: Well, I mean the government is still spending more in
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  Speaker 3: general than it's earning. If you look at the sort
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  Speaker 3: of spending figures, total revenue, so money earned by government
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  Speaker 3: was up to point five billion from last year, spending
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  Speaker 3: up three point four billion, But again a lot of
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  Speaker 3: that coming down to the likes of social security and welfare.
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  Speaker 3: That's both job seeker support. Because the economy is weak here,
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  Speaker 3: you've got more people out of jobs, so that's sort
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  Speaker 3: of cyclical. But of course you've also got those higher
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  Speaker 3: superannuation payments. Like when you look through the numbers, those
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  Speaker 3: are the areas that you see the biggest changes. What
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  Speaker 3: the government has done, particularly around Kaying Aura has seen
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  Speaker 3: a little bit less going through in the expense line,
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  Speaker 3: so that's an important change. But at the same time
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  Speaker 3: there are then concerns in the community around social housing.
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  Speaker 3: So all of this is a very delicate and very
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  Speaker 3: difficult balancing act.
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  Speaker 2: I think, what is it We're supposed to hit surplus
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  Speaker 2: in about four years and twenty twenty nine.
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  Speaker 1: Is that credible?
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  Speaker 3: Well, I mean it also depends on exactly what you
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  Speaker 3: include or exclude from the various measures. I mean, it's
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  Speaker 3: sort of I think it's around twenty thirty is sort
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  Speaker 3: of where my mind is sitting when you look at
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  Speaker 3: the various indicators and realizing that's still a long way
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  Speaker 3: away in terms of other economics. That could come through,
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  Speaker 3: and a whole lot of other changes. So look, I
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  Speaker 3: think we are seeing that first shift towards stabilizing things,
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  Speaker 3: to bringing down expenses as a proportion of GDP, But
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  Speaker 3: it's still going to take a while for those numbers
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  Speaker 3: to get back into what we might feel as a
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  Speaker 3: sort of comfortable and sustainable zone. Let's remember the reason
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  Speaker 3: we need to get the government accounts back into a
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  Speaker 3: more sort of sensible order is that the next time
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  Speaker 3: something comes out of the blue and hits the economy,
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  Speaker 3: we need to have buffer room to respond. And at
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  Speaker 3: the moment, we're still trying to pay off the credit
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  Speaker 3: card bill from the last couple of times we've wrapped
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  Speaker 3: it up.
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  Speaker 2: Hey, listen, what do you make of the OCR announcement
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  Speaker 2: yesterday with the double cut. Do you think that that
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  Speaker 2: is enough to get our spending again?
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  Speaker 3: Well, in a sense, I mean the proof will be
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  Speaker 3: in the pudding, but not for another twelve months. I mean,
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  Speaker 3: those decisions that were made yesterday still won't flow through
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  Speaker 3: to the economy fully. Brad, it was still for a while.
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  Speaker 2: No, But Brad, it was supposed to be a head change,
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  Speaker 2: a game changer in our heads. Right, We're supposed to
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  Speaker 2: stop being scared, stop saving, and start spending effective. Now
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  Speaker 2: is that going to work?
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  Speaker 3: Well, that's the talk. But that's why I'm a little
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  Speaker 3: bit sort of, I guess, curious and a little bit
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  Speaker 3: there's a part in the bottom of my stomach here
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  Speaker 3: that still worries that if we've got you know, three
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  Speaker 3: hundred or so basis points of cuts and that hasn't
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  Speaker 3: done anything, but we're waiting for just that extra little
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  Speaker 3: cut to get us over the line. I worry that
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  Speaker 3: when inflation is nearly at three percent and similar, by goodness,
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  Speaker 3: we could look back at this decision any year's time ago,
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  Speaker 3: we might have overdone it. I get the call for
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  Speaker 3: stimulus and support, but that inflation worry, It really does
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  Speaker 3: sort of stick in the back of my throat and
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  Speaker 3: it worries me that will be there in a year's
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  Speaker 3: time and still concerned.
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  Speaker 2: Yeah, Hey, thanks very much. Brad always appreciated this. Brad
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  Speaker 2: Awesome infametrics principle Economist.
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