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An ode to Caton’s genius

CHRIS Caton is a genius.

The affable Chief Economist of the BT Financial Services group is always happy to explain his economic forecasts to audiences who are willing to listen.

As is customary at this time of the year, forecasters such as Dr Caton look at the year ahead and tell us where they anticipate the economy to be heading.

Given my view of his genius status, it was natural that his were the forecasts that I would look to for some inspiration.

So what are his forecasts? See the table at the foot of this article.

In analysing the figures there are a few areas of interest.

The first is that BT would be in agreement with the Federal Treasurer that perhaps the current account deficit cycle has peaked at its current level and that next year will exhibit some improvement.

The reduction to 5 per cent of GDP will be a welcome relief if achieved.The unemployment rate minimal reduction to 7 per cent is disappointing.

However, it must be said that the latest rate has dropped below that to 6.7 per cent. It will be interesting to see if this can be sustained.

The spike in the headline CPI is not surprising because of the GST effect.

The increase of 2.3 per cent is above the government expectations of 1.9 per cent for the September quarter of next year.

If that spike is seen as a one-off aberration then it is unlikely to spur the Reserve Bank to take any action on the interest rate front.

The slight reduction in the GDP growth is also not surprising, given the lagged effect of the Asian monetary and economic crisis.

Still, as has been pointed out many times, it is surprising what the Australian economy has been able to achieve in the last few years. The term ‘miracle economy’ is an appropriate tag to apply to Australia, particularly in the last three years.

Overall it would seem that BT is confident of our future here in Australia.

Perhaps the suggestion of the end of the world as we knew it, as a result of the Asian crisis, were more than a little premature.

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