In the Mid-Year Fiscal and Economic Review at the end of 2014, Queensland Treasury downgraded its economic growth forecast for Queensland in 2014-15 from 3% to 2.5%, to reflect the weaker economic outlook. After Queensland’s technical recession in the last six months of 2014, in which gross state product (GSP) contracted by around 1 per cent (in seasonally adjusted terms), it appears that the GSP growth estimate for 2014-15 will probably need to be revised down even further at Budget time in July. And it is highly uncertain whether Queensland should still expect growth of around 5.75 per cent in 2015-16, although some of this growth appears guaranteed by LNG exports from Gladstone that are starting to boost Queensland’s export numbers.
As I’ve commented before, I have a lot of sympathy for Treasury in undertaking the challenging tasks of forecasting the economy and the Budget (see Brisbane ABC radio interview– why is budget forecasting so difficult?). At least Queensland Treasury appears to have improved its forecasting performance in the last few years relative to most of the years in the 2000s, in which the forecasting errors were much larger (see chart above). But, as I’ve tried to suggest above, there is a big test to come.