The $18b deficit projection is based, in par,t on a nominal GDP growth of 5%. In the June and December 2012 quarters nominal GDP was running at about 2%.
With terms of trade coming off from record highs, manufacturing struggling and people saving more, what will be the catalyst to get to this 5% figure?
Most analysis I have read today believe this assumption is overstated given the current climate (industry based not political).
Given the above and past records of underestimating, I believe the $18b deficit number is rubbery and not consistent with present and projected future outlook for the 2014 financial year. If nominal GDP does not move significantly who knows what the deficit will be (I am sure someone smarter than me can work it out).
Over the 3 quaters including Jun 12 to Dec 12 nominal GDP growth was outstriped by real GDP growth. Deflation is not a friend when trying to inflate away debt!
