Economic and Tax Forecasting
Scope of Appropriation
This output class is limited to the preparation of economic and tax forecasts, and monitoring of and reporting on economic and tax conditions.
Significant Work Completed During 2009/10
- Provided the Minister of Finance with regular weekly and monthly economic updates. During the year, we changed the focus of the monthly updates from reporting on data released to include more interpretation of macro and fiscal developments. This has helped to stimulate public debate on the New Zealand economy, as witnessed by media coverage and comment that the release of these monthly updates has generated.
- Provided the Minister of Finance with previews and commentaries on key data releases.
- Produced updated macroeconomic and tax forecasts for the Half Year Economic and Fiscal Update (HYEFU) in December 2009 and the 2010 Budget in May 2010.
- Produced macroeconomic impact estimates and tax costings for the 2010 Budget’s tax reform package.
| Performance Dimensions | Target | Performance for 2009/10 | ||||
|---|---|---|---|---|---|---|
| All policy outputs comply with the Treasury's Quality Standards for Policy Advice, as assessed by the Minister three times during the year. | Rated as meeting and frequently exceeding expectations |
Not assessed in 2009/10. Refer to page 60 for further information on the application of the policy standard during 2009/10. |
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| Production of advice that provides options which allow the Government to deliver a credible fiscal strategy consistent with the fiscal prudence provisions of the Public Finance Act 1989. Where this advice is underpinned by modelling, the models are externally quality assured and, where appropriate, assumptions are tested with suitably qualified external experts. | Achieved |
Achieved. Forecasts were delivered on time. Estimates of macroeconomic effects and estimates of fiscal costs enabled the Government to introduce a tax reform package in the 2010 Budget. Forecasts were scrutinised by an external panel of experts (macroeconomic) and by IRD forecasters. Tax policy costing models were quality assured by Treasury analysts, IRD and, in one case, an external consultant. |
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| Tax revenue forecast error on one-year-ahead forecasts. (Tax revenue forecast root mean square error and mean error over the five years to June 2007 were 4.4% and 4.2% retrospectively.) | Less than ±3% |
Achieved. Actual error for 2009/10 outcome vs 2009 Budget forecast was |
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| 2009/10 Actual $000 |
Supp. Estimates - Voted $000 |
Main Estimates $000 |
2008/09 Actual $000 |
|
|---|---|---|---|---|
| Expenses | 2,788 | 2,755 | 2,677 | |
| Funded by: | ||||
| Revenue Crown | 2,736 | 2,705 | 2,627 | |
| Other Revenue | 52 | 50 | 50 |
In 2009/10, the Policy Advice and Management: Macroeconomic appropriation was separated across four output classes within a Macroeconomic Policy Advice and Management MCOA. The structure was established to ensure that the macroeconomic outputs were sensibly aggregated and to allow for more comprehensive performance measures. A summary of the MCOA financials and the 2008/09 comparatives are provided on page 26.
