News story 8th May 2017

Forecasting best remains with treasury: economists

Influential economists have argued that economic forecasts used in framing the Federal Budget should remain within the Commonwealth Treasury, despite the department’s difficulty with making accurate forecasts.

With the release of the Budget only a day away, top economists polled by the Economic Society of Australia (ESA) Monash Forum argue that while there is room for improvement, an independent agency is unlikely to do any better than Treasury.

Forcasting

However, others argue that though an outside organisation may not produce more accurate forecasts, it is less likely to be vulnerable to political inference.

The ESA Monash Forum is a joint initiative between Monash Business School at Monash University and the Economic Society of Australia (ESA). It conducts a monthly poll of 51 eminent industry and academic economists who take part in the ESA's National Economic Panel.

For the May poll, the ESA panellists were asked to respond and leave comments to this question:

The poll received 35 responses; 13 panel members (37%) agreed with the statement, 20 disagreed (57%), and two were uncertain (6%).

Comments from panellists:

Professor Rod Maddock, Monash Business School:

“It is profoundly undemocratic to put 'experts' between the government and the people. The Budget is the government's key economic document and it should take responsibility for it.”

Professor Saul Eslake, UTAS:

“With no disrespect to the Parliamentary Budget Office, there's no reason to think they'd do a better job than Treasury has done of forecasting the major economic parameters required for framing the annual Federal Budget.”

Professor Beth Webster, Swinburne University of Technology:

“Generally, the average of multiple independent forecasts is more accurate than one forecast - but in the case of the Budget, this can be empirically verified. To do this, Treasury would need to commission several independent expert assessors (including university experts). The Treasury would have to make detailed budget data available to independent experts. This would also bring transparency and confidence to the public discussion about budgets and spending.”

Read the ESA Monash Forum Poll results here.