This address discusses the problems with macroeconomic forecasts, using the recent global financial crises as an example.
I have a long-standing interest in this topic, having been involved in macroeconomic forecasting for quite some time. But the topic is of particular interest at the moment, because the global economy has been through such an extraordinary period, and it is worth reviewing how macroeconomic forecasts have fared over this time.
In my talk today, I will focus primarily on forecasts for real GDP growth. I will spend some time talking about the longer-term performance of Treasury’s forecasts. But I will spend most of my time looking at how both public and private sector forecasts evolved in the aftermath of the global financial crisis, and examining the performance of the forecasts presented in the 2009-10 Budget.