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Macroeconomicindicators2012-13BU1May2012

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									                            Economic Forecasting Methodology

General approach

Based on economic theory and econometric analysis, DTF has developed a number of models to forecast
published indicators, or components of those indicators in deriving the final numbers. However, as all forecasts
are inevitably guesses of the likely expected pattern of events, the strict application of the models’ results are
tempered by the application of reasonableness tests, taking into account known events and a broad range of
associated economic indicators not included in the formal models. DTF also strives to take a middle course
whereby the risks attached to each forecast are generally balanced with regard to potential movements up or
down from the central forecasts. DTF aims to produce credible, objective forecasts, in a global economic
environment that contains considerable uncertainty and volatility.




Pubished date: 1 May 2012
Victorian Real Gross State Product Series
as at 2012-13 Budget

                                                                                       (a)
            Historical data *                          Forecasts (annual growth rate, %)
                          Annual                         2011-12                  2010-11                 2009-10
                        growth rate       2012-13         Budget      2011-12      Budget     2010-11     Budget                      2009-10
               $m            (%)          Budget         Update        Budget      Update     Budget      Update                      Budget
1989-90       165 406
1990-91       161 437            -2.4
1991-92       159 243            -1.4
1992-93       166 584             4.6
1993-94       172 326             3.4
1994-95       177 991             3.3
1995-96       184 800             3.8
1996-97       191 889             3.8
1997-98       202 014             5.3
1998-99       214 446             6.2
1999-00       223 129             4.0
2000-01       225 609             1.1
2001-02       235 251             4.3
2002-03       243 732             3.6
2003-04       253 465             4.0
2004-05       263 143             3.8
2005-06       268 758             2.1
2006-07       279 019             3.8
2007-08       288 640             3.4
2008-09       291 352             0.9                                                                          1.25                                          0.50
2009-10       298 123             2.3                                                              2.25        1.50                                          0.25
2010-11       305 615             2.5                                           2.50   3.50        3.25        2.50                                          2.25
2011-12                                         1.50           2.25             3.00   3.00        3.00        3.00                                          3.00
2012-13                                         1.75           2.50             2.75   3.00        3.00        3.00                                          3.00
2013-14                                         2.75           2.75             2.75   3.00        3.00
2014-15                                         2.75           2.75             2.75
2015-16                                         2.75


Sources: Australian Bureau of Statistics; Department of Treasury and Finance.
*ABS Catalogue No 5220.0. Real data based on 2009-10 prices. Historical data are the latest available from the Australian Bureau of Statistics. These data
include revisions to history, so the latest information is not necessarily directly comparable with forecasts in previous budget publications.



Note:
(a) Economic projections are rounded to the nearest 0.25 percentage point.

Forecasting Methodology
Real gross state product
DTF models the different expenditure components of gross state product (e.g. household consumption, dwelling investment, merchandise exports) separately
and combines these forecasts to develop forecasts for real GSP growth. A variety of forecasting approaches are used on the different components, depending
on appropriate economic theory, the availability of indicator series and historical volatility of the component series.




Pubished date: 1 May 2012
Victorian Nominal Gross State Product Series
as at 2012-13 Budget

            Historical data*                          Forecasts ($ m)
                          Annual                        2011-12                     2010-11               2009-10
                        growth rate       2012-13        Budget      2011-12        Budget     2010-11    Budget        2009-10
               $m           (%)           Budget        Update        Budget        Update     Budget     Update        Budget
1989-90       105 696
1990-91       106 490            0.8
1991-92       104 973           -1.4
1992-93       111 246            6.0
1993-94       116 347            4.6
1994-95       122 231            5.1
1995-96       130 405            6.7
1996-97       136 482            4.7
1997-98       143 824            5.4
1998-99       155 037            7.8
1999-00       165 144            6.5
2000-01       175 728            6.4
2001-02       188 637            7.3
2002-03       201 084            6.6
2003-04       213 727            6.3
2004-05       227 033            6.2
2005-06       237 321            4.5
2006-07       254 100            7.1
2007-08       275 678            8.5
2008-09       282 891            2.6                                                                        275 016       268 896
2009-10       298 123            5.4                                                            314 984     284 406       271 037
2010-11       317 152            6.4                                      320 103    319 898    332 482     297 559       282 758
2011-12                                     326 669        329 335        337 688    336 466    349 414     312 260       298 094
2012-13                                     340 305        346 499        354 549    354 185    368 286     328 998       314 154
2013-14                                     357 120        364 282        372 215    371 975    388 094
2014-15                                     375 187        382 351        390 761
2015-16                                     393 722


Sources: Australian Bureau of Statistics; Department of Treasury and Finance.
*ABS Catalogue No 5220.0. Historical data are the latest available from the Australian Bureau of Statistics. These data include revisions to
history, so the latest information is not necessarily directly comparable with forecasts in previous budget publications.



Forecasting Methodology
Nominal gross state product
DTF reflates the real component estimates of GSP using forecasts of deflators for each series to yield nominal GSP. Some deflators are
based on relationships with the consumer price index, while others are based on historical trends.




Pubished date: 1 May 2012
Victorian Employment Series
as at 2012-13 Budget

            Historical data*                            Forecasts (annual growth rate, %) (a)
                          Annual                          2011-12                  2010-11                   2009-10
                        growth rate       2012-13          Budget     2011-12       Budget       2010-11     Budget      2009-10
               '000         (%)           Budget          Update       Budget       Update       Budget      Update      Budget
1989-90        2 082.6           4.3
1990-91        2 029.4          -2.6
1991-92        1 954.0          -3.7
1992-93        1 932.2          -1.1
1993-94        1 946.3           0.7
1994-95        2 018.5           3.7
1995-96        2 076.0           2.9
1996-97        2 098.5           1.1
1997-98        2 134.2           1.7
1998-99        2 168.2           1.6
1999-00        2 197.0           1.3
2000-01        2 272.5           3.4
2001-02        2 292.8           0.9
2002-03        2 339.6           2.0
2003-04        2 375.9           1.5
2004-05        2 450.2           3.1
2005-06        2 506.0           2.3
2006-07        2 587.4           3.2
2007-08        2 669.0           3.2
2008-09        2 691.7           0.8                                                                                          0.25
2009-10        2 766.7           2.8                                                                  2.25        0.25       -1.00
2010-11        2 864.3           3.5                                            3.50      2.75        2.00        1.25        0.50
2011-12                                          0.00           0.75            1.75      2.00        1.75        1.75        1.50
2012-13                                          0.25           1.50            1.75      1.75        1.75        1.75        1.50
2013-14                                          2.00           1.50            1.75      1.75        1.75
2014-15                                          1.75           1.75            1.75
2015-16                                          1.75


Sources: Australian Bureau of Statistics; Department of Treasury and Finance.
*ABS Catalogue No 6202.0. Historical data are the latest available from the Australian Bureau of Statistics. These data include revisions to
history, so the latest information is not necessarily directly comparable with forecasts in previous budget publications. Twelve-month
average of seasonally adjusted monthly data.


Note:
(a) Year-average per cent change on previous year, rounded to the nearest 0.25 percentage point.



Forecasting Methodology
Employment
Employment growth forecasts are informed by leading indicators, such as job vacancies and job advertisements, for the next few quarters
and historical trends beyond that time period.




Pubished date: 1 May 2012
Victorian Unemployment Rate Series
as at 2012-13 Budget

            Historical data*                   Forecasts (year-average level, %) (a)
                                                 2011-12                     2010-11                2009-10
                                20112-13          Budget        2011-12       Budget    2010-11     Budget        2009-10
                   %             Budget           Update         Budget      Update     Budget      Update        Budget
1989-90                 4.8
1990-91                 8.3
1991-92                11.0
1992-93                11.7
1993-94                11.8
1994-95                 9.6
1995-96                 8.7
1996-97                 9.1
1997-98                 8.3
1998-99                 7.5
1999-00                 6.6
2000-01                 6.0
2001-02                 6.4
2002-03                 5.7
2003-04                 5.4
2004-05                 5.5
2005-06                 5.2
2006-07                 4.8
2007-08                 4.5
2008-09                 5.1                                                                                             5.00
2009-10                 5.5                                                                  5.50          6.50         7.00
2010-11                 5.1                                            5.25      5.50        5.50          6.75         7.75
2011-12                                 5.50             5.50          5.00      5.25        5.25          6.75         7.75
2012-13                                 5.75             5.25          5.00      5.00        5.25          6.75         7.75
2013-14                                 5.50             5.00          4.75      5.00        5.25
2014-15                                 5.25             5.00          4.75
2015-16                                 5.00


Sources: Australian Bureau of Statistics; Department of Treasury and Finance.
*ABS Catalogue No 6202.0. Historical data are the latest available from the Australian Bureau of Statistics. These data include revisions to history,
so the latest information is not necessarily directly comparable with forecasts in previous budget publications.
Twelve-month average of seasonally adjusted monthly data.

Note:
(a) Year-average per cent level, rounded to the nearest 0.25 percentage point.



Forecasting Methodology
Unemployment rate
The unemployment rate is calculated as the residual of forecasts for employment (published), the civilian population (not published) and the
participation rate (not published). The civilian population forecast is based on projections of Victoria’s population by age and sex prepared by DTF
and the Department of Planning and Community Development (DPCD). The participation rate forecasts project forward the current participation
rate but adjust for the likely impact of population ageing.




Pubished date: 1 May 2012
Melbourne Consumer Price Index Series
as at 2012-13 Budget

            Historical data*                           Forecasts (annual growth rate, %) (a)
                          Annual                         2011-12                  2010-11                   2009-10
                        growth rate       2012-13         Budget     2011-12       Budget       2010-11     Budget      2009-10
              Index         (%)           Budget         Update       Budget       Update       Budget      Update      Budget
1989-90          100.0           8.3
1990-91          105.8           5.8
1991-92          108.1           2.2
1992-93          108.9           0.7
1993-94          111.1           2.0
1994-95          114.1           2.7
1995-96          118.4           3.7
1996-97          119.9           1.2
1997-98          119.8          -0.1
1998-99          120.9           0.9
1999-00          124.1           2.6
2000-01          131.6           6.0
2001-02          135.3           2.8
2002-03          139.7           3.2
2003-04          142.8           2.3
2004-05          145.7           2.0
2005-06          150.2           3.1
2006-07          154.2           2.6
2007-08          159.6           3.6
2008-09          164.1           2.8                                                                                         3.25
2009-10          167.5           2.1                                                                 1.75        2.00        2.00
2010-11          173.0           3.3                                            3.00     3.00        2.25        2.25        2.25
2011-12                                         2.25           2.75             2.75     2.75        2.50        2.50        2.50
2012-13                                         2.75           3.00             2.50     2.50        2.50        2.50        2.50
2013-14                                         2.50           2.75             2.50     2.50        2.50
2014-15                                         2.50           2.50             2.50
2015-16                                         2.50


Sources: Australian Bureau of Statistics; Department of Treasury and Finance.
*ABS Catalogue No 6401.0. Average of four quarters of original data in financial year.

Note:
(a) Year-average per cent change on previous year, rounded to the nearest 0.25 percentage point.

Forecasting Methodology
Consumer Price Index
DTF uses two models to inform consumer price index forecasts. The first model is an augmented Phillips curve econometric model,
incorporating inflation expectations and demand factors, while the second is a bottom-up model of assessments of CPI group price
movements which is used to develop overall CPI forecasts.




Pubished date: 1 May 2012
Victorian Wage Price Index Series
as at 2012-13 Budget

            Historical data *
                             (a)
                                                        Forecasts (annual growth rate, %) (a)(b)
                          Annual                          2011-12                  2010-11                     2009-10
                        growth rate       2012-13          Budget     2011-12       Budget         2010-11     Budget      2009-10
              Index         (%)           Budget          Update       Budget       Update         Budget      Update      Budget
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98            68.3
1998-99            70.4            3.1
1999-00            72.5            3.0
2000-01            74.9            3.3
2001-02            77.5            3.5
2002-03            80.3            3.6
2003-04            82.9            3.2
2004-05            86.1            3.9
2005-06            89.4            3.9
2006-07            92.6            3.6
2007-08            96.2            3.9
2008-09           100.0            4.0                                                                                          4.25
2009-10           102.8            2.8                                                                  3.00        3.00        3.75
2010-11           106.7            3.8                                          3.75       3.25         3.25        3.25        3.25
2011-12                                          3.50           3.75            3.75       3.50         3.50        3.50        3.50
2012-13                                          3.00           3.75            3.50       3.50         3.50        3.50        3.50
2013-14                                          3.25           3.50            3.50       3.50         3.50
2014-15                                          3.50           3.50            3.50
2015-16                                          3.50


Sources: Australian Bureau of Statistics; Department of Treasury and Finance.
*ABS Catalogue No 6345.0. Historical data are the latest available from the Australian Bureau of Statistics. These data include revisions to
history, so the latest information is not necessarily directly comparable with forecasts in previous budget publications. Average of four
quarters of original data for financial year.


Note:
(a) Total hourly rate excluding bonuses
(b) Year-average per cent change on previous year, rounded to the nearest 0.25 percentage point.

Forecasting Methodology
Wage Price Index
DTF uses an econometric model to estimate growth in wage rates, incorporating movements in consumer prices and the unemployment
rate as well as the effect of minimum wage decisions.




Pubished date: 1 May 2012
Victorian Population Series
as at 2012-13 Budget

            Historical data*                             Forecasts (annual growth rate, %) (a)
                            Annual                         2011-12                  2010-11                   2009-10
                         growth rate       2012-13          Budget     2011-12       Budget       2010-11     Budget      2009-10
             Number          (%)           Budget          Update       Budget       Update       Budget      Update      Budget
1989-90       4 378 592          1.4
1990-91       4 420 373          1.0
1991-92       4 455 002          0.8
1992-93       4 472 387          0.4
1993-94       4 487 570          0.3
1994-95       4 517 387          0.7
1995-96       4 560 155          0.9
1996-97       4 597 201          0.8
1997-98       4 637 820          0.9
1998-99       4 686 402          1.0
1999-00       4 741 339          1.2
2000-01       4 804 726          1.3
2001-02       4 863 084          1.2
2002-03       4 923 485          1.2
2003-04       4 981 467          1.2
2004-05       5 048 602          1.3
2005-06       5 126 540          1.5
2006-07       5 221 310          1.8
2007-08       5 326 978          2.0
2008-09       5 446 612          2.2                                                                                           1.80
2009-10       5 537 060          1.7                                                       1.90        2.10        1.90        1.60
2010-11       5 621 210          1.5                             1.40           1.70       1.80        1.90        1.80        1.50
2011-12                                           1.60           1.50           1.50       1.70        1.80        1.70        1.40
2012-13                                           1.60           1.50           1.50       1.60        1.70        1.60        1.40
2013-14                                           1.60           1.50           1.50       1.60        1.70
2014-15                                           1.60           1.50           1.50
2015-16                                           1.60


Sources: Australian Bureau of Statistics; Department of Treasury and Finance.
*ABS Catalogue No 3101.0. Historical data are the latest available from the Australian Bureau of Statistics. These data include revisions to
history, so the latest information is not necessarily directly comparable with forecasts in previous budget publications. Population as at June
quarter of financial year. Annual growth rate is per cent change on previous June quarter.


Note:
(a) Per cent change on previous June quarter, rounded to the nearest 0.1 percentage point.



Forecasting Methodology
Population
Population forecasts are based on the age-cohort projection model developed by DTF and DPCD. This model incorporates assumptions
relating to natural increase, net overseas migration and net interstate migration based on national and Victorian trends.




Pubished date: 1 May 2012

								
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