Tuesday, 26 October 2010

Growth higher than expected

Growth was at the upper range of expected outcomes in the third quarter at 0.8 per cent: Growth

This does not fit well with the forecasts of those who have been predicting a double dip recession. However, I always thought this was largely a question of semantics. There isn't that much difference between a negative growth rate and a positive one if the latter is not robust enough to generate enough private sector jobs to replace those lost in the public sector.

Consumer confidence as revealed by retail sales is not strong and one test for policy will be when the 20 per cent VAT rate is introduced in the new year. The public sector job cuts will, of course, not happen all at once and some of them will take the form of retirement from the labour force. But when they start to cut in, policy will be tested.

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