An analysis of the accuracy of the Treasury's macroeconomic and tax forecasts.
Comparisons with other forecasters
We have compared the performance of the Treasury's real GDP growth and CPI inflation forecasts with those produced by other forecasters as published in Consensus Economics Inc.'s monthly report "Asia Pacific Consensus Forecasts". For this exercise, we have used the forecasts published in the same month in which the Treasury's forecast was finalised. In this way, we are determining how the Treasury's forecasts rated against all forecasts that were available to Ministers at the time they used those forecasts to inform their decision making.
However, it also means that most, if not all, of the comparator forecasts were prepared earlier than the Treasury's forecasts which means that the Treasury's forecasts will have had the benefit of more recent data than the comparator forecasts. This may have biased the results of the comparison in the Treasury's favour and readers should bear this in mind when interpreting the results.
Each data point represents the average (RMSE) forecast error for a particular forecaster for that forecast horizon. Each set of data points therefore represents the range of forecast errors at each forecast horizon for the 15 forecasters, plus Treasury and consensus. (Consensus is the arithmetic average of the 15 forecasters' forecasts.) The Treasury's average forecast errors (red data points) are consistently towards the lower end of each range, indicating that the Treasury's forecasts of real GDP growth were amongst the most accurate of these forecasters.
Similar to the real GDP growth forecast result, the Treasury's CPI inflation average forecast errors were consistently towards the lower ends of the error ranges.
Furthermore, no single forecaster was consistently the best forecaster at every forecast horizon for either real GDP growth or CPI inflation.