Ryan Bridge: The growth forecast in Budget 2025 at least gives us hope

Good morning and guess what? Things are looking up. The future's looking pretty good.

Not from budget announcements themselves, necessarily, but the Treasury forecasts.

We'll hit just shy of 3% growth next year. It'll average 2.9% across the next four years. Unemployment gets back below 5%. Inflation is beaten at 2%. Wages grow faster than costs at 2.7%.

These are the best forecasts we have, and they show that even if the global outlook gets worse, we'll still grow by a whisker shy of 3% next year.

We've been talking about them all year but thank the Lord for our primary sector exports. They're in high demand. Prices are up. Payouts are up. Tourism is coming back back on, albeit slowly.

Finally, after effectively two years of going backwards, and four years of feeling very poor, things look like they're finally turning a corner. The good old days are coming back.

But the pain isn't over yet. The forecasts have us actually going backwards 0.8% this year. And you can feel that and see it some of the confidence, employment, card spending and PSI data we spoke about the other day.

The services sector is still in contraction, unlike most of our trading partners.

The government surplus is also a fly in the ointment.

Despite average growth of almost 3% a year for the next four years, Nicola Willis won't, in any of them, return to books surplus and actually start paying down the debt.

Debt's costing us more than Defence, Police, Corrections, Justice, and Customs combined. It peaks at 46% in 2028 and won't come down below 40% target in this forecast period.

Why not? Net debt doubled under the last lot and your net borrowing is still increasing as a proportion of the economy, and the economy's going to grow.

Nicola Willis says this would have required harsher cuts to health and education. If you were running a business, you'd gut the costs out because there's more fat to trim.

But she's not running a business, she's running a country. Cut too deep and your risk being turfed out in 2026 and the next lot reversing all the cuts anyway. In a way, deep cuts are less sustainable, politically, than smaller, incremental ones.

That's not to take away from the growth track.

The question of reliability is a reasonable one to ask. Treasury's been wrong before. The elephant in the White House is, of course, Donald Trump. He's to economists what cyclones are to meteorologists, quite hard to predict with accuracy.

Trying to nail down an accurate forecast is like trying to whack a pinata, blindfolded, and drunk.

So all of this is to say that finally, on the whole, you'd have to feel a bit more hopeful about the future of this country today than you did yesterday.

 

 

 

 

 

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Episode Transcript

Speaker 1 (00:00):
Guess what things are looking up? Futures looking bright everybody
not from the budget announcements themselves necessarily, but the treasury forecasts,
if they are to be believed and on home more
on than a second, will hit just shy of three
percent growth next year. It will average two point nine percent,
so basically three percent across the next four years. Unemployment

(00:23):
back below five, inflation down at two, wages growing faster
than costs at two point seven percent. Great, but there
is a dip. This is an update on the halfierly
the HAFU. There is a dip first to get through
of down point eight percent. The government surplus also a

(00:44):
fly in the ointment. Despite that average growth of almost
three percent a year for the next four years, willis
won't in any of these years return the books to
surplus and actually start paying down the debt. It's very expensive.
Costs us more to service than to defence, police, corrections,
justice and customs combined. It peaks at forty six percent

(01:05):
twenty twenty eight and won't come down below the forty
percent target band in this forecast period. And you say
why I do? I say why not? Net debt doubled
under the last lot and your net borrowing is still
increasing as a proportion of the economy, and the economy
is going to grow. Willis says this would have required

(01:26):
harsher cuts, you know, health, education, that stuff. If you
were running a business, though, you'd gut the costs, wouldn't you.
There's more fat to trim. But Willis sadly is not
running a business. She's running a country. You cut too
deep and you risk being turfed out in twenty twenty
six and the next lot, reversing the cuts you've made anyway,
In a way, deep cuts less sustainable politically than smaller,

(01:51):
incremental ones. And this is not to take away from
the growth track. The question of reliability is a reasonable
one to ask. True, he's been wrong before. We know that.
The elephant in the White House is, of course, Donald Trump.
He is to economists what cyclones are to meteorologists, quite
hard to predict with accuracy. Trying to nail down an

(02:14):
accurate forecast is a bit like trying to whack a
pinata blindfolded and drunk. So all of this is to
say that, finally, on the whole, you'd have to feel
a bit more hopeful about the future of this country
today than you did Yesterday. For more from Early Edition
with Ryan Bridge, listen live to News Talk Set B

(02:35):
from five am weekdays, or follow the podcast on iHeartRadio