Officials are notoriously careful
when it comes to predictions about the future. (In a previous life Henry often
had to double the changes in the predictions of the lifetime officials he had to
deal with.) Now Treasury’s innate caution has got its boss into hot
water.

Look at Treasury’s woeful record
predicting Australia’s exports. “Strong
recovery, Treasurer” has been the story, consistently wrong for several years
now. I bet Treasury has also been surprised at the buoyancy of the labour market
and of corporate profits, and the overall strength of the economy for that
matter – the evidence is its systematic underprediction of the budget surplus.
The reason of course is deeply ingrained caution, and it is therefore no suprise
that Treasury was deeply cautious in its predictions about the effects of IR
reform.

The Treasurer is in my view entitled
to hold a more optimistic view, and indeed if he was not more optimistic than
Treasury about just about everything there would be very little policy reform of
any sort!

…If only the Treasurer could add
some real tax reform to the mix he would be a hero.

Read the full article at Henry
Thornton.