Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

I thank the honourable member for his question because it goes to the forecasting methodologies used by the Treasury, which have been the subject of some debate in the last period of time. The first change which is evident in the way the Treasury has presented its forecasts and its projections for the years ahead is to add one extra year—that is important to note. It is to bring it into consistency with international practice. For example, in the United States there are three estimates years and seven projection years. In New Zealand there are five estimates years and 10 projection years. In Sweden there are four estimates years and three projection years. In Australia there are three estimates years and two projection years. That is a change that we have made because it is useful in terms of long-term economic planning and long-term economic forecasting to bring these practices in Australia into conformity with emerging practice abroad. That is the first point.

The second point I would make to the Leader of the Opposition goes to the question of the underpinning of the growth forecast in the two out-years of the forward estimates. First, it should be noted by those opposite that the three years of below-trend growth occur in 2008-09, 2009-10 and 2010-11—that is, these are all below trend growth. The two years above trend are the two years at the outer end of the spectrum—that is, 2011-12 and 2012-13, where, as the Leader of the Opposition has just indicated, real GDP is assumed to grow at 4.5 per cent. However, here is the point I would draw to the attention of the Leader of the Opposition: growth is forecast to remain below trend for three years—that is, longer than during the downturns of the 1980s and the 1990s. In the 1980s you had below-trend growth for a year following that recession; in the 1990s, it was below-trend growth for two years. Here is an assumption on our part that it will in fact be a slow return to above-trend growth.

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