Assessing recent external forecasts
This article compares the performance between external forecasts and Reserve Bank of New Zealand published projections for real GDP growth, CPI inflation, the 90-day interest rate and the trade weighed index (TWI) to examine the accuracy of different forecasts. Since 2003, the Reserve Bank has collected and analysed forecasts from as many as 13 external forecasting agencies as part of the process of monetary policy formulation. The forecasts help to identify risks around the Reserve Bank forecasts. Reserve Bank forecasts are more accurate than most, significantly outperforming the external average for one-year ahead GDP growth, two-year ahead CPI inflation and two-year ahead TWI forecasts. However, our analysis shows that a number of external forecasting agencies perform reasonably well, suggesting that these forecasts are likely to be useful when formulating monetary policy.