An updated report released today on the performance of the Treasury’s economic and tax forecasts shows that the accuracy of forecasts continues to improve.
Compared to previous reports:
- average errors for tax forecasts have reduced;
- average forecast errors for macroeconomic variables are about the same. There has been some reduction in average forecast errors for the shorter-horizon forecasts, but a slight increase at the longer horizons; and
- the Treasury’s economic forecasts compare more favourably with others’ forecasts.
"The report shows us that in general, the Treasury’s economic and tax forecasts have improved over the last few years," said Deputy Secretary Dr Peter Bushnell.
"The accuracy of our tax forecasts is comparable to that of similar forecasts in Canada, Australia and the United Kingdom."
However some of the Treasury’s CPI inflation and tax receipts forecasts have tended to be too low (on average, over time), reflecting in part the unusual strength of the economy during the period measured.
"We are pleased with these positive trends in our forecasting, and acknowledge that there is still room for improvement," said Dr Bushnell.
"Ministers need good information from the Treasury, especially during periods of unfavourable economic conditions. This means it is important that Treasury forecasts are timely and accurate.
"We continually strive to improve our forecasting capability, especially in those areas that are challenging for all forecasters, such as picking turning points in the economy, forecasting sustained periods of high or low growth, and forecasting tax revenues from the finance and investment sector where tax flows tend to be more volatile."
The full report and a summary version including graphs are on the Treasury website at: http://www.treasury.govt.nz/publications/informationreleases/forecastingperformance/reviews
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