The Dim-Post

December 18, 2013

Chart of the day, but only if you’re already having a pretty slow day

Filed under: finance — danylmc @ 9:41 am

I was involved in a twitter discussion yesterday about Treasury’s economic predictions and how they tend to be overly rosy, and I wondered if that was the case back when Labour were in power. Or were Treasury growth pessimists under a Labour government?

Well here’s the answer, sourced from the HYEFU stats at Treasury. They are mostly pessimists under Labour and mostly optimists under National. Or, to put it another way: when Labour were in government the economy grew faster than Treasury predicted, and under National it under-performed their forecasts. Not consistently though. How about that forecasting for 2010? Dead accurate!

treasury forecasts

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42 Comments »

  1. Nice.

    Alternation explanation: pessimistic in times of growth (which you might want out of your forecasts), optimistic in times of sluggishness and maybe stuff happening after the recession that is new and difficult to forecast(?). I don’t know.

    Comment by Sam Warburton — December 18, 2013 @ 9:47 am

  2. Also, omitting 2000 (outlier?), the red doesn’t look too bad.

    Comment by Sam Warburton — December 18, 2013 @ 9:50 am

  3. Nice. Treasury should get that bonus for 2010. Anything more than 1% out and they can pay extra tax :)

    Comment by rob stowell — December 18, 2013 @ 10:12 am

  4. If you were to go back to 1999 and randomly generate a number between (say) -1 and 3 for each, would that outperform Treasury’s advice?

    Comment by Andrew Geddis — December 18, 2013 @ 11:02 am

  5. >>>If you were to go back to 1999 and randomly generate a number between (say) -1 and 3 for each, would that outperform Treasury’s advice?

    That is mean Andrew!!! But it would be cheaper. Oh but wait the computer costs would blow out!!!

    Comment by DV — December 18, 2013 @ 11:39 am

  6. The Y axis is billions of dollars, right?

    Is this available as percentage inaccuracies instead of inaccurate amounts? For all the chart shows, it could be 0.1% either way from the actual growth for every single year. That’s unlikely, of course, but hey…..

    Comment by izogi — December 18, 2013 @ 12:35 pm

  7. Andrew, the chart shows the difference in billions between what the treasury predicted, and the actual figure; which in theory should be random.

    Comment by Commenter — December 18, 2013 @ 1:04 pm

  8. Um, I’m fairly sure the y-axis is measured as % of GDP.

    So a gap of -2.5 means that Treasury predicted GDP growth 2.5% higher than actually occured.

    Comment by Vanilla Eis — December 18, 2013 @ 2:18 pm

  9. Um, I’m fairly sure the y-axis is measured as % of GDP.

    That’s what I assumed, too. If it isn’t, then the whole exercise is an even more complete waste of time that it already is!!!!

    Comment by Andrew Geddis — December 18, 2013 @ 2:37 pm

  10. Oh, I hadn’t even thought it might already be a percentage. That’s one of the hazards of a loosely labelled chart, I guess.

    The x axis is years, right?

    Comment by izogi — December 18, 2013 @ 2:55 pm

  11. I presume 2.5% means that treasury predicted (say) 4% growth in GDP but it was actually 6.5% growth.

    Small request: When you go to the effort of doing up a graph for the interwebs, it’d be awesome if the data could be posted alongside (csv is plenty). That way others can play with the data more easily (e.g. Andrew’s suggestion could be tested)

    Comment by lefty — December 18, 2013 @ 3:24 pm

  12. so whats your point?

    Comment by grant — December 18, 2013 @ 9:08 pm

  13. aahh sorry just seen elsewhere, you’re sucking up to Clint.

    You should stop pretending to be a commentator and just declare yourself as a shill. Really.

    “A shill, also called a plant or a stooge, is a person who publicly helps a person or organization without disclosing that they have a close relationship with the person or organization.
    “Shill” typically refers to someone who purposely gives onlookers the impression that they are an enthusiastic independent customer of a seller (or marketer of ideas) for whom they are secretly working. The person or group who hires the shill is using crowd psychology to encourage other onlookers or audience members to purchase the goods or services (or accept the ideas being marketed). Shills are often employed by professional marketing campaigns. “Plant” and “stooge” more commonly refer to any person who is secretly in league with another person or organization while pretending to be neutral or actually a part of the organization he is planted in, such as a magician’s audience, a political party, or an intelligence organization (see double agent).[citation needed]”

    Comment by grant — December 18, 2013 @ 9:17 pm

  14. Hey, look … “grant” knows how to use a dictionary! So do I!!

    Bore: to be exceedingly dull and uninteresting.

    Comment by Flashing Light — December 18, 2013 @ 9:34 pm

  15. Given the imprecision of economic prediction, having only a 1 % error or less (as it has been since 2001, with the exception of 2009, the year following the great meltdown), is really quite a feat. And if the y-axis is in billions of dollars (and Danyl has still not clarified that for us), then it is even better – fractions of %.

    Comment by David in Chch — December 18, 2013 @ 10:23 pm

  16. Agreed it is not a great error most years but the point was not “look, Treasury out by less than 1% most years” – rather, they seem to be overly pessimistic when Labour is leading government and overly optimistic when National does.

    Comment by MeToo — December 19, 2013 @ 8:07 am

  17. I believe the technical term given to a prediction made by a professional economist about the future is “wrong”. Reading a Treasury forecast in the Dominion Post is roughly on a par with reading the daily horoscope – what it lacks in scientific rigour or factual accuracy it makes up for in its entertainment effects on the weak-willed and gullible, such as National Party politicians.

    Comment by Economic Illiteracy Support Group — December 19, 2013 @ 8:35 am

  18. Interestingly enough the 2010 dead-spot coincides with when the ‘Supercity’ kicked in.

    I’m just saying – for some reason – something happened in 2010 which appears to have rendered Treasury incapable of predicting what was going to happen to large amounts of cash.

    Comment by LeeC — December 19, 2013 @ 11:29 am

  19. Danyl *really* needs to clarify what the y-axis means. This could mean that Treasury hasn’t been out on total GDP growth by more than 2.5% of total GDP growth, or it could mean that if GDP grew by 1% and they predicted 3.5% then they’re out by 350%. I’d be *astonished* if they were able to get the accuracy to within 2.5% in the first sense.

    Comment by Ben Wilson — December 19, 2013 @ 12:03 pm

  20. I’m just saying – for some reason – something happened in 2010 which appears to have rendered Treasury incapable of predicting what was going to happen to large amounts of cash.

    Giant earthquakes? Big tax code reforms? Nah, too obvious.
    It’s clear that CWB becoming Mayor ruined the gyroscopic balance of Treasury’s magic 8-ball. Fucking lefties.

    Comment by Gregor W — December 19, 2013 @ 1:05 pm

  21. And this just in – what would happen if economists wrote Christmas cards: http://www.theatlantic.com/business/archive/2013/12/if-economists-wrote-christmas-cards/282493/

    Comment by Economic Illiteracy Support Group — December 19, 2013 @ 1:49 pm

  22. It’s good to have a sense of humour Gregor. Here’s one for ya :

    How many ‘Fucking lefties’ does it take to replace a light bulb?

    Only one: but it might take him about 30 years to realise that the old one has burned out.

    Comment by LeeC — December 19, 2013 @ 2:24 pm

  23. Meanwhile the neoliberals have been sitting in the dark for the past 30 years, still utterly convinced the invisible hand will be along soon to change the bulb for them.

    Comment by Rob — December 19, 2013 @ 2:35 pm

  24. A valiant attempt Rob, but it lacked the mongrel element. . .

    Comment by LeeC — December 19, 2013 @ 2:36 pm

  25. No Lee, you don’t get it – it’s funny because Rob doesn’t have any reading comprehension.

    Comment by Phil — December 19, 2013 @ 4:31 pm

  26. I concede.

    Comment by Lee C — December 19, 2013 @ 6:25 pm

  27. I predict that predicting the future will become a thing of the past,

    Either that or Google will buy it up.

    Comment by NeilM — December 19, 2013 @ 7:09 pm

  28. If anyone actually knew the Treasury economists, economic statistics (and thereby the large confidence intervals and unforecastable shocks involved), or was at least willing to be a little bit reasonable, most of what is being implied in the post and stated in the comments sounds like “conspiracy theories”. I’m waiting for someone to make the “logical” link of discovering Treasury officials are lizard people, or the illuminati.

    Comment by Matt Nolan — December 20, 2013 @ 8:21 am

  29. I think most people are merely observing that treasury, who presume to sit in their glass tower and lecture us all on matters of economic purity, are pretty hopeless when it comes to forecasting the real economy in the real world. Not much scope for lizard people there, but hey if it helps your little economically orthodox world to revolve a little better to imagine it is all just conspiracy theories then go for it brother.

    Comment by Sanctuary — December 20, 2013 @ 8:26 am

  30. If anyone actually … was at least willing to be a little bit reasonable …

    I know that, in the spirit of Christmas, it is a time to wish for the unattainable (e.g. “Peace on Earth, and Goodwill to All Men (sic)”), but really …!!!!!!

    Comment by Andrew Geddis — December 20, 2013 @ 10:40 am

  31. “If anyone actually knew the Treasury economists, economic statistics (and thereby the large confidence intervals and unforecastable shocks involved)”

    So what you’re saying, Matt, is that these incredibly competent, and well remunerated, economists are really no better than tarot card readers…

    Comment by Ross — December 20, 2013 @ 10:51 am

  32. Matt, it’s worth noting that the Vote Analysts at Treasury regularly refuse to accept those same caveats from other public sector agencies/ organisations and will slag them off as being incompetent and making excuses when agencies point out such issues. Also, this sort of pattern also doesn’t need to be caused by some deep anti-Labour conspiracy but rather could be an indication that there are systemic flaws in Treasury’s modelling framework: empirical evidence shows that the policy settings Treasury’s model suggests will reduce growth actually increase it, while the policies that should increase growth actually slow it down (though obviously this graph by itself isn’t evidence of that).

    Comment by NBH — December 20, 2013 @ 11:09 am

  33. Why don’t Treasury clearly publish the uncertainty in these forecasts? Trawling through the HYEFU publication yields feck all uncertainties, other than a couple of alternate scenarios (another point estimate, but at least there’s more than one) and one plot with uncertainties around revenue forecasts based on previous forecasting performance. After all, if you can quantify a point estimate, surely you can quantify the uncertainty as well.

    Comment by lefty — December 20, 2013 @ 12:11 pm

  34. >Why don’t Treasury clearly publish the uncertainty in these forecasts?

    Because explaining 1% +/-5% would get exhausting. It sounds like “no idea”, when in fact it’s just “as good an idea as the data we collect can give you”. Predicting total GDP to within 5% is pretty good really. But it makes accuracy in growth predictions rather farcical, when it’s typically much smaller than the error margin. Saying “we’re 70% confident there will be positive growth” sounds too uncertain. So they give precise numbers, and then vague statements like “the economic outlook is positive, but there are concerns around increasing house price inflation”.

    Comment by Ben Wilson — December 20, 2013 @ 1:03 pm

  35. Note Treasury does publish uncertainty see the risk and scenarios of the HYEFU http://www.treasury.govt.nz/budget/forecasts/hyefu2013/019.htm and on forecasting it might be informative to read the forecasting performance reviews http://www.treasury.govt.nz/publications/informationreleases/forecastingperformance.

    Comment by WH — December 20, 2013 @ 1:55 pm

  36. Treasury are required to predict the future. And most of us are pretty bad at do if that.

    Would it make for better govt if no part of the public service attempted to predict the future.

    (I get the point about how maybe Treasury responds differently to Labour vs National but that could be more good times vs bad times – the boom that coincided with Labour vs the GGF that happened in 2008).

    Comment by NeilM — December 20, 2013 @ 7:20 pm

  37. Now, now, NeilM – since when do discussions on internet blogs involve logic and perspective? ;)
    You might start a trend.

    But I won’t be holding my breath.

    Comment by David in Chch — December 20, 2013 @ 10:54 pm

  38. Marketing, yes. Marketing himself as a crazy swivel-eyed loon.

    Comment by Daniel Lang — December 21, 2013 @ 11:03 am

  39. Wrong post.

    Comment by Daniel Lang — December 21, 2013 @ 11:04 am

  40. #22 & 23: How many neo-liberals does it take to change a light bulb?

    None, they tell people to get used to living in the dark. Or…

    None, they put in the bulb and let the world revolve around them.

    Comment by deepred — December 22, 2013 @ 9:52 pm

  41. Nurse! the rib-stapler!

    Comment by Lee C — December 23, 2013 @ 6:33 am

  42. That costs extra..

    Comment by Sacha — December 24, 2013 @ 4:39 pm


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