Government forecasts cautious

BOTH the Federal and State Government’s seem to be taking the cautious approach to economic forecasting so that any surprises emulating from the tax changes will be positive not negative.

This was the view expressed by Deutsche Bank senior economist Bruce Hockman when addressing a Perth media briefing recently.

“They are setting themselves up so that any surprises for people will be good,” Mr Hockman said.

He said the WA Government budget, handed down recently, looked surprisingly responsible for a government going to the election.

“It is better to have a good surprise than a bad surprise,” he said.

When the GST is in place, the economic figures may prove better than the less optimistic Government figures, he said.

“The GST frankly will turn out to be a net positive, not a negative.

Mr Hockman believes concern for the WA Government’s chances of being re-elected after the introduction GST may not be warranted.

The WA Government will be the first government to head to the polls after the GST is introduced and will be a gauge on community reaction to the new tax.

Mr Hockman said the WA Government may be the first to benefit from the GST – a view not shared by many political commentators who expect Court to be the first to fall from a public backlash.

“The strong thing going for the Court government is his financial management credentials or the perceived credentials,” Mr Hockman said.

He said it was likely the lessons from the Jeff Kennett defeat served as a reminder to Mr Court that good financial management was not the only thing which was important to the electorate.

Mr Hockman said criticism levelled at Premier Richard Court that he had failed to diversify the WA economy was unfounded.

He believes the economy had diversified in a number of areas including the provision of education services and tourism.

The diversification had taken up some of the slack left by low commodity prices.

“The basic principle of economics is, in the long haul, stick to your knitting,” Mr Hockman said.

“WA will always be overweight in the resource sector.

“You don’t just diversify for diversifications sake,” he said.

Mr Hockman said there were no sharp distinctions between the old and new economies as many commentators had led us to believe He said the new economy is dependent on sectors of the old economy, including commodities produced in WA – putting the State in the winning seat now commodity prices appear to have turned the corner.

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