It’s Treasury’s turn today to confess how they got their economic forecasts so wrong over the past eighteen months. Treasury head Martin Parkinson describes the Treasury’s errors at length in the attached speech. In short, they made the same errors as the RBA, over estimated exports, under estimated imports and assumed lot’s of capital gains from consumers who couldn’t wait to bid up houses and shares again. In short, the first part of the speech is an excellent sedative.
The second half, however, is quite interesting as Parko takes us through the macroeconomic management framework that governs Budget decision-making. It’s too long to excerpt but the discussion is attached between pages 9 and 18. I’m shocked to say that I pretty much agreed with Parko on all of it. A first for me!