Budget deficit suggests economy weaker
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Central bank governor Glenn Stevens does not think a decline in federal government revenue means much for interest rates.
The government has delayed returning the budget to surplus this financial year because of a hit to revenues, but has yet to indicate how big a deficit there is likely to be in 2012/13.
"If it's a billion or two that's - from out point of view on the aggregate economy - not a big amount," the Reserve Bank of Australia (RBA) chief told the house economics committee sitting in Canberra on Friday.
"To the extent that less revenue is coming in, because the economy is weaker, then I'm not sure that means anything for interest rates - other than we've got to watch out for the economy being softer than we thought."
He said there were two factors the RBA considered when there was a shift in the budget position.
These included questions about whether it was happening because the government had decided to deliver a tax cut, or because an increase in spending meant it would need to run a deficit.
"If they are running a larger deficit or smaller surplus because the economy is weaker ... that's telling you a different message about the economy, because that is telling you the economy is weaker," Mr Stevens said.
"The other one is telling you the economy is going to be stronger."