Ross Garnaut's Bleak Economic Outlook For Australia Is Looking Like A 'Core' Scenario

June 2007 – The Pasha Bulker Runs aground at Newcastle after stormy weather (Getty/Ezra Shaw)

The bleak outlook that Melbourne University Professor Ross Garnaut paints for the future of the Australian economy and workers is at odds with the more positive outlook painted by RBA governor Glenn Stevens recently.

But the AFR reports this morning that “according to Victoria University’s Centre of Policy Studies (CoPs)”, the bearish economic scenario Garnaut paints is more realistic than many imagine.

The AFR reports that:

James Giesecke, director of CoPs, said his team set out to model Garnaut’s Dog Days scenario as an alternative to the conventional “optimistic” economy scenario. But as they loaded in standard assumptions used by Treasury and other government forecasters to predict things like resources output and export prices, “some of the flavour of the pessimistic story of Dog Days emerged as the core scenario,” Giesecke says.

As Business Insider highlighted yesterday, Garnaut’s outlook for the economy is one of a falling standard of living. But to the extent that the scenario painted in his book Dog Days, and which became core in the modelling, is so bleak highlights the risks that Australia faces in the years ahead.

However, as the joke goes, ask two economists their outlook and you are likely to get at least three views. Not so fast, says former senior Treasury economist David Gruen – soon to be head of the Australian Bureau of Statistics – who in a counterpoint to the Garnaut and CoP view said the modelling was too pessimistic.

Either way though, what Garnaut, Gruen and the Melbourne Economic Forum – which was the venue for the debate yesterday – are highlighting is that Australia needs to have a conversation about living standards, where they are headed and how they can be maintained.

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