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Tuesday, 29 November 1983
Page: 2950

Mr PEACOCK —My question is addressed to the Treasurer. Let us go from the powerful treatise which I produced last week to one which had the same degree of shock but for which there was greater reticence in bringing it forward. I refer to the updated National Economic Summit Conference projections by the Department of the Prime Minister and Cabinet which have been concealed from the Parliament and the public. Will the Treasurer advise the House exactly what the impact of the recent improvement in housing, farm output, stocks and employment will be on the Department's projection of between 820,000 and almost one million people unemployed by 1985-86? Will the Treasurer ask the Prime Minister's Department to adjust the projections to take account of these allegedly significant changes in economic indicators and make the revised projections public? Will the Treasurer advise the House whether most of these revisions are likely to involve mainly timing changes over three years, leaving the ultimate unemployment levels little changed from their disastrous projected levels for 1985-86?

Mr KEATING —I have made the point on a number of occasions since last week when this projection, or part of it, was released in a business magazine that it is a projection and not a forecast. It is not an official Government forecast. The purpose of the projection, for some of the dummies on the Opposition back benches, is to illustrate a result of key parameter changes on a certain set of assumptions. The Government can make use of those assumptions and examine the likely impact of changes in respect of its policy mix. To that extent there is a substantial difference, a quantitative difference, between a projection and a forecast, which is a forecast of what might actually happen.

The Leader of the Opposition asked me a question in relation to unemployment. The Government asserted at the National Economic Summit Conference and also in the Budget, and remains committed to it, that the Government will achieve its target of creating 500,000 jobs over a three-year period which would put the unemployment rate somewhere between 9 and 9 1/2 per cent instead of the projection figure of 11.1 per cent. In respect of some of the assumptions in the projections, particularly those in respect of migration, population changes and also of the participation rate, I indicate that the Government disagrees with some of those assumptions. Therefore, because of the sensitivity of the projection to those assumptions, particularly over an extended period, one does get a different effect and one can see a different effect between a projected unemployment rate of 11.1 per cent and that which the Government has been forecasting of 500,000 jobs in the period.

I simply make the point that the growth in employment so far, if extrapolated over the three years, would indicate that the Government would easily achieve the target of 500,000 jobs. We can see an employment growth of 82,000 since April compared with the disastrous period of the former Government, when we saw a rise in unemployment of 250,000 in the previous year. The likelihood is that from a very slow start employment growth will indeed pick up and at that level we would be in a position to meet that target of 500,000 jobs.

Mr Howard —What did EPAC think of this?

Mr KEATING —In responding to the interjection, the Economic Planning Advisory Council questioned some of the assumptions on which the projection was based and did not accept the paper. I make this point and will quote the projection to the Leader of the Opposition because it may be his first lesson on the difference between a projection and a forecast. The projection says:

It bears repeating that the results are not to be interpreted as forecasts or predictions of 'likely' outcomes. Actual outcomes may well differ considerably from what is projected here, as a comparison of the Summit projection with the outcome for 1982-83 . . .

It goes on to say:

For the purpose of the projections a series of illustrative policy options has been specified, including in respect of budgetary settings. Of course the actual policy to be followed will be determined in the light of conditions at the relevant time. Those choices, in turn, will have implications for economic developments.

The projection goes on further to say:

The aim of the projections, therefore, is to provide a concrete focus for examining the implications of changing some key economic parameters.

The Government then has the opportunity to examine what effect certain parameter changes would have on outcomes. Finally, it goes on to say:

. . . there is therefore more to be gained from comparisons of the three projections than from consideration of any one in isolation.

In other words what is being said by the authors of the projection is that it is not the outcomes which are important but the differences in the projections on the assumptions which have been included in each projection.

Mr Sinclair —Time!

Mr KEATING —A member of the Opposition has asked a question but honourable members opposite do not wish to have the reply. The differences are that with different inputs there are likely to be different effects, but the importance is between the effects, not the outcomes. That may be complex and difficult for the geniuses on the front bench opposite to understand, but that is essentially it. In respect of the more important point raised by the Leader of the Opposition, the economy is running along very strongly. To indicate to the Leader of the Opposition the economic upturn, I refer him to page 1 of the Melbourne Age, which indicates again the increasing strength in production, a strength which has also been apparent in employment since April, and in retail sales. It refers to the 9.2 per cent inflation rate as a result of the 1.6 per cent quarterly increase, the lowest quarterly increase for five years, and the decline in interest rates of 2 per cent since the beginning of the financial year. By and large, on the dwellings front construction is now running at an almost record level of 140,000.

So on the basic assumptions on which the Leader of the Opposition's question was based, the economy is performing much better than either scenario A or projection one. Indeed, the Government does not accept the unemployment asessments in projection one, which we have rejected for the reasons I have stated today, amongst others. Hence it is the Government's belief that its target of reaching 500,000 jobs over a three-year period is achievable. Upon such realisation, the unemployment rate after three years will be very much lower than the 11.1 per cent in projection one.