Statement 7: Forecasting Performance and Scenario Analysis
The economic and fiscal forecasts presented in the 2015‑16 Budget incorporate assumptions and judgments based on information available at the time of preparation. The forecasts are subject to considerable uncertainty. This Statement details the forecasting performance for the key macroeconomic aggregates of real and nominal GDP and estimates of government receipts. The Statement also presents a number of scenarios which help to illustrate the sensitivity of budget aggregates to changes in parameters.
The macroeconomic and fiscal forecasts presented in the 2015‑16 Budget incorporate assumptions and judgments based on information available at the time of preparation.
Budget macroeconomic and fiscal forecasts are important for Government policy and decision‑making. The budget estimates provide a fiscal baseline against which policy decisions are taken by the Government. Better forecasting, and a better understanding of the uncertainties around the forecasts, contributes to better policy and decision‑making.
This Statement presents an assessment of forecasting performance and estimates of uncertainty around the forecasts. This is consistent with moves of fiscal agencies around the world to improve forecasting performance and raise awareness of the uncertainties inherent in forecasting.
The macroeconomic forecasts are reliant on the assumptions underpinning them. The economic forecasts and the forward estimates of revenue and expenses are closely linked. The fiscal forecasts are therefore sensitive to the assumptions underpinning the economic forecasts. This statement illustrates how alternative assumptions or other developments can affect the economic and fiscal outlook. A discussion of economic and other assumptions and the sensitivity of budget estimates to changes in these assumptions is one of the requirements of the Charter of Budget Honesty Act 1998.