And in the Right corner we have True Economics..
So why are these unrealistically high numbers? Why now? Why from the ESRI? We can only speculate.
NCB’s note says: “We think the greatest domestic risk to economic recovery is that the fiscal consolidation which has begun is not seen through or that taxes bear even more of the adjustment than currently envisaged (ironically the ESRIs document could halt the process of adjustment as unions/ government point to the fact that the economy is forecast to average growth of 6.5% in the future). This would have a major knock effect on consumption, competitiveness and borrowing costs and as such GDP growth.”
That is, as far as I can understand it, a hint at something that I completely agree with. ESRI is a quasi-Governmental organization with no real independence in sight. In fact, what passes for ‘independent’ thinking in the ESRI’s usual policy work is a mix of Labour’s leftism in social policy department and Garret Fitz FG’s legacy in taxation thinking (i.e the inherent inability of the ESRI to actually think rationally about tax burden and the damage it does to our economy). Hence, ESRI saying today that ‘look – things are going to be just fine in couple of years’ can be interpreted as their masters’ signal to the unions and the social partners that the discomfort they might feel to be will be rewarded out of the spoils of the growing economy once again tomorrow. The timing of this rosy forecast – close enough to the elections is also, at the very best, an unfortunate coincidence. Link to article
And in the Left, is Notes on the Front May 18th Morning: The Recession Diaries
here is a serious question over where our growth – economic and employment – will come from. If we can’t return to the halycon days of FDI, don’t want to return to a property bubble, if there is little likelohood of future credit-fuelled consumer spending, and with public sector employment likely to contract – that leaves us relying primarily on the indigenous sector. Yet, only 10 percent of the jobs growth in our traded services sectors came from this sector. Our indigenous sector has always been reliant on the downstream of FDI, property and retail, and the public sector (either direct or through public procurement).
The ESRI has taken into account none of these developments. They have relied on textbook models. But we don’t have a textbook economy (no country does, by the way). They claim, again without any substantiation, that wage cuts will give our export base a boost – even though we are a relatively low-wage economy. They call for drastic adjustments (read: cuts) in public expenditure – even though this is the only sector capable of undertaking the economic investment to give our indigenous sector a boost.
In short, I don’ get it. Link to article
OK, not agreement really, but a joint sense of puzzlement at the assumptions in the ESRI projections. Not being a proper economist, I can only rely on my memory of John Fitzgerald assuring a packed meeting in 2006 set up to discuss the need for road charging and land value taxes that the coming adjustment will be a ‘soft landing’ and to put aside any worry that a property collapse, like I lived through when I first graduated as an architect, would happen again.
Today, my newly qualified architect son has emigrated to Norway where apparently they allow themselves to worry about such things.
So I think we should be afraid, be very afraid, of any assurances coming from the ESRI.
