GST hyper-optimism

In today's charts we can see repeated overly optimistic Treasury forecasts for GST revenues compared with the less dramatic actual revenues. While the estimates in the Budget papers for 2008, 2009 and 2010 may have been plausible at the time, I have real doubts about the plausibility of the 2012 and 2013 estimates. I think we can have a reasonable conviction that nominal economic growth will not return to its pre-GFC, debt-fueled exuberance anytime soon.

In the legend B stands for the Budget papers, and M for the Mid-Year Economic and Fiscal Outlook (MYEFO) documents. The numerals are the year of publication; for example, B13 is the most recent 2013-14 Budget.

Another way to think about these forecasts is too look at the successive estimates for a particular financial year.

For the 2013-14 financial year, the last GST revenue estimate is almost $7 billion less than the first estimate. The last estimate for 2012-13 is lower than the estimate made in the 2009-10 Budget at the height of GFC awareness. No wonder the states and territories are a little grumpy and calling for a GST rate increase.

For some reason, these charts remind me of the quote attributed to Einstein, "Insanity: doing the same thing over and over again and expecting different results". When will Treasury learn?