A Man Whose Economic Forecasting Makes Astrology Look Respectable

I see Bill English has just admitted he made up some of the figures on asset sales.

He's also said that the fiscal impact of the sales will be "roughly neutral" and will leave us with "less debt".

Well that sounds familiar. Where have we heard Bill English talking about "fiscally neutral" "debt-reducing" economic programs before.

Oh that's right, it was those "fiscally neutral tax cuts" that put a $1.1billion hole in the books.

Surely that's a one-off. Highly trained economics professionals and an experienced finance minister aren't in the business of putting out fallacious figures and then sheepishly revising them when they're caught out ... are they?

Unfortunately, yes they are.

Note what happened there. Before the election, our competent economic managers were talking about 3.4% growth for the next year. Post-election, it's 2.8%. That might not sound like much, but by my amateur calculations, that indicates Treasury was out by something like 17%. Hardly reassuring.

But don't despair! We may have screwed up and over-estimated how well the recovery'd be going by now by nearly a fifth ... but there is good news! We're actually going to grow by 3.8% the year after that! Not 3.3% like we previously claimed!

Again, these are figures out by an amount of less than twenty per cent, although this time in the government's favour. This might ordinarily sound plausible, but consider why Treasury revised its figures for growth till March '13 downward. It reckoned it had overestimated the economic benefits of the Christchurch rebuild and underestimated the severity of the ongoing Eurozone crisis.

This would be the already-much-vaunted Christchurch rebuild that's apparently going to account for 1.25% of GDP growth over the next five years, and the Eurozone crisis every man and his dog (although apparently not every minister and his lapdogs) has been witnessing deteriorate for months now.

But wait ... it gets worse. 

Pandering to National's base, pre-election English's ministry was claiming it'd be able to deliver a $1.45 billion surplus for 2014-15. Post-election it's claiming it will be able to deliver a $370 million surplus.

Wow. The Nats have somehow managed to lose more than a billion imaginary dollars out of their "Brighter Future." Presumably that's even after the well-above-valuation revenue they're expecting to reap from those well-mandated asset sales we keep hearing about.

Anyway, my point is simple. Governor Mario Cuomo pithily stated that "you campaign in poetry; you govern in prose". Or, put another way, from the perspective of a Minister of Finance wishing to maintain his ministerial salary, it's fiscally prudent to over-state how well he's doing before the election ... but the closer one's forecasts come to fruition, the more prudent it becomes to revise them downward toward reality.
Not that GDP growth forecasts from the boy who cried fiscal stimulus package actually have much worth anyway.

Of course, it's one thing to fudge one's economic forecasting; in that case Treasury's economic sooth-sayers can, as they have done, plead ignorance of changing circumstances in a "dynamic environment" as explanation (even though this looks these days more like a case of the Austrian economists burying their collective head in the sand).

It's quite another thing to simply make up numbers.

Or, being charitable to English, merely repeat made-up numbers from the year before in the hope nobody's noticed the continuing falsehood.

However, in fairness, these numbers tend to come from Treasury - a department which, as Harold Wilson observed "could not, with any marked success, run a fish and chip shop." We have thus come to expect a certain level of incompetence in the numbers department from the people we presumably pay to be reasonably accurate about the economy. With this in mind, the standard gNat line of defence when called on the frequently wild inaccuracy of a Treasury entrail reading is to pass the buck and point out that the Minister did not come up with the projection and that it's therefore someone else's fault.

Witness English's response above. When Guyon Espiner calls him on the credibility of the 170,000 jobs figure, English retreats and insists Treasury forecasting is "done independent of the government"; despite the fact he shares a "sense of confidence" in those forecasts.

With respect, the Minister should not be able to have it both ways. He can't put forward a made-up number as evidence the economic policy contained in his Budget is working (and, presumably, has been working for some years given the figure's repetition), then when called on the question as to whether it's predicting job growth for this or some other, more successful economy state that Treasury, not him, did the portent-reading. He especially can't do it when it turns out that his own government is patently unaware of any hard evidence for the number in question. Either he has confidence in his forecasting or he doesn't, and taking the above statements at face value, he patently does.

Thus, whichever way you look at it, this is a government whose economic forecasting makes astrology look respectable, which leads me to the unfortunate conclusion that a Maori economic axiom from the 1860s still holds true today. Namely, NEVER TRUST THE ENGLISH.