Nov 13, 2012

Buyer beware when even RBA thinks its forecasts are rubbery

When even the Reserve Bank thinks its forecasts should be handled with care, private forecasters owe their users an explanation, write Glenn Dyer and Bernard Keane.

Caveat emptor is usually applied to buying cars, food and other products and services. It should apply to economic forecasting as well. Surprisingly the Reserve Bank thinks it should and should especially apply to its own forecasts.

Four times a year the central bank releases its Statement of Monetary Policy. They examine the conduct of monetary policy, the way the economy is travelling and forecast future levels of inflation and economic growth. The final SMP for the year was released last Friday and gained considerable publicity for a lowering of economic growth forecasts for 2013 and 2014, and a raising of the bank’s forecasts for inflation. Newspapers, radio and TV all picked up on these changed forecasts.

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4 thoughts on “Buyer beware when even RBA thinks its forecasts are rubbery

  1. Jimmy

    What economic forecasting isn’t 100% accurate, who would of thought? Certainly not the MSM who simply regurgitate ver batim.

    Economic forecasting has always been diifcult but in thes current conditions it is almost impossible – Europe could stay stable or go severely backwards at the drop of a hat, China could see growth slowing further (not the economy slowing just it’s growth) stabilise or increase again, and the US could continue it’s recovery or plunge headlong back into recession in just over a month.

    And that is before we get to whether the Australian consumer will finally see the glass half full and stop saving at record rates.

  2. drew crikey peter crikey

    In the times of reporting in 140 characters, do you expect anything different?

    Many economic forcasters predictions are as erratic as their proliferation’s are brief.

  3. Dogs breakfast

    Keep it going Glen and Bernard. If you have ever read any of the stuff I put on here you would know I consider most journos professionally innumerate.

    You’re right in every sense about this. I’m a business analyst, of sorts, and a generic analyst of everything, and I haven’t seen a forecast worth printing. In spite of being an analyst, I will never stoop to forecasting, it is a waste of my time and any clients.

    What is surprising is just how long it is taking us to realise that even fancy-pants statistically fluent forecasting is as worthless as a number picked out of a hat. We need to get away from this idea that forecasting has any value, and gear ourselves, our businesses and ultimately our country to being flexible, intuitive and quick to change, not gazing into opaque crystal balls.

  4. Jimmy

    Dogs Breakfast – What is the old saying about watching the weather forecast but always taking an umbrella?

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