The recent pronouncement by Glenn Stevens the head of the RBA that the AUD was way too high and that real estate was stuffed piqued my interest the RBA’s ability to forecast. In doing a bit of research I came a across a document by the Treasury that sought to access the forecasts and methodology of the Treasury. In the document I came across the chart below.
It would appear that Treasury are no great shakes at forecasting but the RBA seems to be worse. When decision making there are three components that bind our decision making. We can never have infinite intelligence, perfect information and endless time in which to make a decision. Therefore all our decisions are imperfect. However, it is intriguing that a group who are the oracles and custodians of all the information that go into forecasting get it so wrong so often. This once again not only points to the complex nature of economic systems but also to the futility of listening to economists.
