What is business going to invest in – and why?

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The whole premise of he government’s economic policy is that we’re going to grow out of recession and that business is going to rush in to fill the void government spending cuts create in the economy — from which business has been to date “squeezed out” by over-active government.

This is summarised ion this table issued by the Office for Budget Responsibility issued yesterday:

Despite cuts some households are going to spend more.

Exports are going to grow modestly — so it’s clear Ireland, Spain, Portugal and Belgium having woes won’t trouble us.

Government is slashing spending — both on current spending and most especially on investment.

And — most important — although household growth is modest at best whilst trade growth is negligible and businesses biggest customer is slashing spending — especially on investment which it always buys from the private sector — business is going to be investing enormously.

It’s just not going to happen. What it it going to be spending on? And why should it spend? What’s the rationale for doing so without any government stimulus for doing so?

Candidly if Robert Chote believes this he’s lost it. The Guardian clearly doubts he does and is much closer to the truth:

The OBR's Robert Chote went out of his way to stress the uncertainties. For all the fiendish complexities, at heart forecasting is the art of the ruler: straight lines reconnect a depressed present with a trend extrapolated from a happier past. Thus business investment — which has sunk like a stone — is now predicted to surge. Perhaps it will. If so, the wider economy may dodge the axe being flung at the state. But perhaps business will falter. If so, Mr Osborne will learn the lesson being absorbed by those early cutters in Dublin whom he once admired. Namely, that writing pain into the start of his story does not guarantee a happy ending.

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