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Pre-election Economic and Fiscal Update 2014

Alternative Scenarios

The following scenarios show how the economy might evolve if some of the key judgements in the central forecast are altered (Table 3.1). The scenarios represent two of a number of ways that the economy could deviate from the central forecast. Scenario one represents the economic impacts of weaker short-term domestic demand combined with a larger decline in the terms of trade. Scenario two represents the economic impacts of stronger growth in the US.

Table 3.1 - Summary of key economic variables for central forecast and scenarios
March years 2014
Actual
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast

Real GDP (annual average % change)

         
Central forecast 3.3 3.8 3.0 2.2 2.1
Scenario one 3.3 3.4 2.9 2.2 2.2
Scenario two 3.3 4.0 3.1 2.2 1.9

Unemployment rate1

         
Central forecast 6.0 5.6 5.2 4.8 4.5
Scenario one 6.0 5.6 5.4 4.9 4.6
Scenario two 6.0 5.5 4.9 4.5 4.4

Nominal GDP (annual average % change)

         
Central forecast 7.0 5.2 4.2 4.4 3.7
Scenario one 7.0 3.8 3.0 5.0 3.7
Scenario two 7.0 5.7 5.0 4.7 3.8

Current account balance (% of GDP)

         
Central forecast -2.8 -4.8 -6.2 -6.4 -6.4
Scenario one -2.8 -5.1 -6.5 -6.1 -6.1
Scenario two -2.8 -4.8 -5.9 -5.9 -6.0

90-day bank bill rate2

         
Central forecast 3.0 4.3 4.9 5.0 5.3
Scenario one 3.0 3.7 3.8 4.1 4.8
Scenario two 3.0 4.6 5.2 5.3 5.5

Notes:

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

Sources: Reserve Bank, Statistics New Zealand, the Treasury

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