Estimates of uncertainty around budget forecasts


John Clark, Caroline Gibbons, Susan Morrissey, Joshua Pooley, Emily Pye, Rhett Wilcox and Luke Willard1

Working Paper 2013-042

January 2014

Date created: November 2013

Date modified: January 2014


We use past forecast errors to construct confidence intervals around Australian Government Budget forecasts of key economic and fiscal variables. These confidence intervals provide an indication of the extent of uncertainty around the point estimate forecasts presented in the Budget.

JEL Classification Numbers: E17, H68
Keywords: Confidence intervals, forecast errors

John Clark, Susan Morrissey and Joshua Pooley
Tax Analysis Division
Revenue Group
The Treasury
Langton Crescent
Parkes ACT 2600

Caroline Gibbons
Budget Policy Division
Fiscal Group
The Treasury
Langton Crescent Parkes ACT 2600

Emily Pye
DFAT — Australian Aid Program
London Circuit
Canberra ACT 2601

Rhett Wilcox and Luke Willard
Domestic Economy Division
Macroeconomic Group
The Treasury
Langton Crescent
Parkes ACT 2600

1 Correspondence: or The Treasury, Langton Crescent, Parkes ACT 2600, Australia. We thank Jenny Allen, Jason Allford, Patrick Boneham, Roger Brake, Phil Gallagher, David Gruen, David Haigh, Rob Heferen, Michael Kouparitsas, Martin Parkinson, Nigel Ray, Barry Sterland and Jim Thomson for suggestions on earlier drafts and David Blackman for assistance in preparing this paper. Emily Pye was with the Australian Treasury when she contributed to this project.

2 The views expressed in this paper are those of the authors and do not necessarily reflect those of the Australian Treasury or the Australian Government. This version of the paper incorporates a minor correction in the calculation of the central forecast and the outcome of payments affecting charts 5, 8, B2 and page 15.