Gotta tell The Boss we are under threat – when it comes to the economy, the budget deficit and all that – from a new quarter.
The Boss and his advisers remain relatively chirpy but are a bit bothered about what might happen in Europe.
As he said in his State of the Nation speech the other day, the Government is still on track to get back into surplus in 2014/15 but it would push out the date if the global economy went into meltdown.
The upcoming Budget Policy Statement in February will forecast a surplus in the range of $300 to $500 million, he said.
But referring to the possibility that the Europe debt crisis could push the world back into recession, he said: “If the absolute worst happened and there was a major shock to the global economy, the Government would look at whether retaining that surplus target would actually harm the economy by forcing a sharp reduction in demand…”
Mr Key said the most likely outcome was that European countries would manage through the crisis with the Euro intact because it was in their collective interest to do so.
“But that is by no means guaranteed.”
But while the Europeans are sorting things out in their patch, economist Nouriel Roubini is warning of Iran triggering a global recession, too.
Roubini, of course, is nicknamed “Dr. Doom” for his gloomy predictions in the run-up to the financial meltdown four years ago.
Now he is saying the fallout from the Iranian crisis could last the rest of this decade.
Roubini, widely acknowledged to have predicted the crash of 2008, sees tough times ahead for the global economy and is warning that without major policy changes things can still get much worse.
He also warned that a conflict with Iran over its controversial nuclear program could lead to a global recession.
Roubini is a professor of economics and international business at New York University.
He spoke in an interview this week with The Associated Press at a dinner on the sidelines of the gathering of global big-shots gathered in Davos to discuss business, the economy and what-have-you.
Looking at economic prospects this year, he agreed with the International Monetary Fund’s latest forecast that the global economy is weakening.
Actually, he said he might be “even slightly more bearish” on its prediction of 3.3 percent growth in 2012.
“There are lots of sources of uncertainty from the eurozone, from the Middle East, from the fact that the U.S. is not tackling its own fiscal problem, from the fact that Chinese growth is unbalanced and unsustainable, relying too much on exports and fixed investments and high savings, and not enough on consumption. So it’s a very delicate global economy,” Roubini said.
He said the biggest uncertainty is the possibility of a conflict with Iran over its nuclear program that involves Israel, the United States, or both. That could lead oil prices now hovering around $100 a barrel to spike to $150 per barrel, he said, and lead to a global recession.
That’s the thing about bloody economists.
They are always banging on about uncertainties.
Still, those uncertainties never stop them making their predictions.
Here’s hoping Dr Doom is dead wrong.