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When we talk about the long-term economic outlook, especially regarding the budget’s fiscal implications, it’s easy to assume that governments hold all the cards. However, the reality is often more nuanced, particularly when looking at projections stretching out to 2030-31 and beyond.
One crucial aspect where the government’s direct influence is surprisingly limited is in predicting or actively shaping nominal growth. While policies can certainly create a favorable environment, factors like global economic trends, technological advancements, and unforeseen events play a monumental role. Essentially, the government must largely ‘take things as they come’ when it comes to the broader trajectory of nominal growth over such an extended period.
This isn’t a criticism, but rather an acknowledgement of the complex interplay of forces in the global economy. Understanding this limitation is key to interpreting long-term fiscal forecasts and recognizing the inherent uncertainties involved in planning for the distant future.
Source: Original Article
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