Fun with fiscal forecasting

Apparently fiscal forecasts are the cool new thing to blog about since both major parties are talking about them. As the frantic blogging shows, even political commentators are getting excited about their spreadsheets at the moment. However, the only consensus so far is that nobody really knows who’s right about what.

Thankfully economists have a lot of experience with forecasting, and the accompanying abuse when one gets it wrong. As Matt has written about many times previously, the main thing to remember is that forecasting isn’t about the numbers: it’s about the story. Your numbers, however good at the time, will always be overtaken by events and end up being wildly inaccurate. What’s important is the reasoning behind the numbers and how it stacks up. For example, the argument about accounting conventions that’s presently raging in the political blogs may or may not be good politics — that’s not my area of expertise — but it doesn’t seem to be adding to our understanding of either party’s policies. Whether borrowing to invest in the Super Fund adds to a particular measure of debt is fairly irrelevant and won’t change anyone’s views on the policy. What people care about is whether the government borrows to invest in it at all, and each party’s policy on that seems fairly well established.

Moreover, it would be a shame if this election campaign degenerated into a war of spreadsheets, when there’s little that the details of projected costings can tell us about the merits of a party’s policies. Goff and Key may have started down the road of acting as if they’re interviewing for the CE’s job but arguing over projected investment returns is taking things too far!

  • Kimble

    So which one is right?

    • http://www.tvhe.co.nz Matt Nolan

      None of them.  Vote for the party who isn’t going to do anything.

  • http://www.barkconsult.nl Beroepskeuzetest

    @kimble
    That remains the question … I would say neither … Both have an opinion…. still a part of truth

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