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Pre-election Economic and Fiscal Update 2017

Key Economic Assumptions Used in the Fiscal Forecasts

The fiscal forecasts are prepared on the basis of underlying economic forecasts. Such forecasts are critical for determining revenue and expense estimates. For example:

  • A nominal GDP forecast is needed in order to forecast tax revenue.
  • A forecast of CPI inflation is needed because social assistance benefits are generally indexed to inflation.
  • Forecasts of interest rates are needed to forecast finance costs, interest income and discount rates.

A summary of the key economic forecasts that are particularly relevant to the fiscal forecasts is provided in Table 2.13 below.

Table 2.13 - Summary of key economic forecasts used in fiscal forecasts
Year ending 30 June 2016
Actual
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
2021
Forecast
Real GDP1 (ann avg, % chg) 2.7 2.8 3.2 3.7 2.8 2.3
Nominal GDP2 ($m) 253,086 268,821 282,626 296,548 310,543 323,240
CPI (ann avg, % chg) 0.3 1.4 1.3 1.7 2.1 2.1
Govt 10-year bonds (ann avg, %) 3.2 2.9 2.9 3.3 3.8 4.1
5-year bonds (ann avg, %) 2.6 2.3 2.7 2.9 3.5 3.8
90-day bill rate (ann avg, %) 2.7 2.1 2.0 2.3 3.1 3.7
Unemployment rate (ann avg, %) 5.2 5.0 4.9 4.6 4.4 4.3
Employment (ann avg' % chg) 2.3 5.4 2.7 2.1 1.5 1.1

Notes:

  1. Production measure.
  2. Expenditure measure.

Source: The Treasury

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