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Alternative Scenarios

The following scenarios show how the economy might evolve if some of the key judgements in the main forecast are altered (Table 3.1). The scenarios are only illustrative in that they are two of a large number of possible examples, and do not represent upper or lower bounds for the forecasts, with more extreme paths possible. They represent what are assessed to be key risks to the Budget Update forecast and illustrate the impact of relatively small changes in the assumptions on key economic and fiscal variables. Although not the most likely outcome, there is a realistic prospect that these scenarios could occur. The scenarios are based on their impact on nominal GDP and tax revenue over the forecast period and no judgement is made as to whether these would be beneficial or detrimental to the New Zealand economy over a longer period of time.

Table 3.1 - Summary of key economic variables for main forecasts and scenarios
March years 2012
Actual
2013
Estimate
2014
Forecast
2015
Forecast
2016
Forecast
2017
Forecast

Real GDP (annual average % change)

           
Main forecast 1.9 2.5 2.4 3.0 2.6 2.2
Upside scenario 1.9 2.5 2.9 3.6 2.7 1.9
Downside scenario 1.9 2.5 2.4 2.9 2.6 2.1

Unemployment rate1

           
Main forecast 6.7 6.9 6.0 5.9 5.5 5.2
Upside scenario 6.7 6.9 5.9 5.6 5.2 5.0
Downside scenario 6.7 7.3 6.3 6.1 5.8 5.6

Nominal GDP (annual average % change)

           
Main forecast 3.8 2.7 6.4 4.6 4.3 3.9
Upside scenario 3.8 2.7 6.8 5.7 5.1 4.1
Downside scenario 3.8 2.7 5.7 3.7 3.7 3.2

Current account balance (% of GDP)

           
Main forecast -4.4 -4.8 -4.8 -5.2 -5.8 -6.5
Upside scenario -4.4 -4.8 -4.9 -5.6 -6.6 -7.3
Downside scenario -4.4 -4.8 -5.2 -5.4 -6.2 -7.0

90-day bank bill rate2

           
Main forecast 2.7 2.7 2.7 3.6 4.3 4.8
Upside scenario 2.7 2.7 3.0 4.1 5.4 6.0
Downside scenario 2.7 2.7 2.7 3.1 3.4 4.1

Notes:

  1. March quarter, seasonally adjusted
  2. March quarter average

Sources: Statistics New Zealand, the Treasury, RBNZ

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