Doubts cast over Government’s growth forecasts after ABS figures show state final demand fell by 0.2 per cent

THE State Government has over-estimated a key measure of economic growth every year for the past five years, casting doubts on its economic forecasts for the future.

18/06/15 State Premier Jay Weatherill and Treasurer Tom Koutsantonis arrive at the Adelaide Convention Centre before later delivering the Budget today. photo Calum Robertson

• GDP figures show economy stuck in slow lane

THE State Government has over-estimated a key measure of economic growth every year for the past five years, casting doubts on its economic forecasts for the future.

Australian Bureau of Statistics figures released on Wednesday show the state’s economy, measured by state final demand, contracted by 0.2 per cent in the last three months of the financial year, with a figure of $24.8 billion posted.

State final demand, which is a particular measure of economic performance, was $98.8 billion for the full year, up 1.3 per cent on the previous year but falling short of the Government’s Budget forecast of 2 per cent.

The Government’s forecast has been too optimistic every year for the past five years.

The year before that it significantly underestimated state final demand.

Opposition treasury spokesman Rob Lucas said a lack of accurate forecasting would translate into overambitious estimates for the amount of revenue raised by taxes such as stamp duty, and cast a cloud over the Government’s plans to bring the budget back into surplus.

“This raises very serious questions about the accuracy of the estimates that underpin the Government’s forecasts,’’ he said.

“The record has shown a history of overestimation of growth which translates sooner or later into potential overestimation in terms of stamp duty collection.’’

Treasurer Tom Koutsantonis

A spokesman for Treasurer Tom Koutsantonis said the current forward estimates were conservative, reflecting the difficult economic times..

“The forecasts for the 2015-16 State Budget recognise the challenges in the South Australian economy and show the lowest set of forecasts for gross state product over the forward estimates in the past 22 years since forward estimates were produced,’’ he said.

“At the national level, the Commonwealth Treasury has over-estimated gross domestic product growth for four out of the last five years.

“This reflects the difficulty in predicting economic outcomes against the backdrop of a changing policy environment at the national level, international macroeconomic factors, and inherent uncertainty about the future.

“Nevertheless the forecasts remain useful for budget development purposes and are prepared using well established methodologies.”

The ABS said a strong fall in housing construction in the past quarter and falls in non — dwelling construction and intellectual property products contributed to the recent weakness in the state’s performance.

Nationally the economy grew a slower-than-expected 0.2 per cent in the three months to the end of June, dragged down by waning Chinese demand for resources including iron ore and coal.

Economists had forecast 0.4 per cent growth in the April-June quarter.

Annual growth for the year through June was 2 per cent, well below Australia’s long-term average of 3.2 per cent.

Treasurer Joe Hockey said the latest figures showed the Australian economy was resilient because other resource-reliant economies including Canada and Brazil were now in recession.

“The transition away from a reliance on mining investment is well under way,” Mr Hockey said.

“Quite clearly there is resilience in the Australian economy that other economies that have huge exposure to commodity prices could only wish for.”

The Australian economy has entered its 25th year of continuous growth, although falls in prices for iron ore and coal, which are the nation’s biggest exports, have dented growth rates in the past few years.