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Statement 7: Forecasting Performance and Scenario Analysis

 

The economic and fiscal forecasts presented in the 2016‑17 Budget incorporate assumptions and judgments based on information available at the time of preparation. These forecasts are subject to considerable uncertainty.

This Statement provides details of the historical performance of Budget forecasts for the key macroeconomic aggregates of real and nominal GDP as well as for estimates of government receipts. The Statement also presents a number of scenarios seeking to illustrate the sensitivity of budget aggregates to changes in economic forecasts and projections, and some underlying assumptions.

Overview

The macroeconomic and fiscal forecasts presented in the 2016‑17 Budget incorporate assumptions and judgments based on information available at the time of preparation.

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 contribute to better policy and decision making.

This Statement presents an assessment of the historical performance of Budget forecasts and estimates of uncertainty around the forecasts. This assessment is consistent with the practice of many other international fiscal agencies to improve forecasting performance and, more importantly, to raise awareness of the uncertainties inherent in forecasting.

This Statement also presents an analysis of the sensitivity of 2016‑17 Budget estimates to changes in key assumptions as required under the Charter of Budget Honesty Act 1998. An analysis of how alternative assumptions over the medium term can affect the economic and fiscal projections is also included.