Macro Analysis

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Economic Impacts of Selected Macro Shocks:
report to the Parliamentary Budget Office
Nov 2017

The Parliamentary Budget Office (PBO) commissioned me to analyse the impact of specific macroeconomic shocks on key economic parameters that influence the Budget. The outputs of the analysis were then used by PBO to adjust forecasts for those economic parameters. PBO then used its modelling of the relationship between the economic parameters and the Budget to assess the effects on the Budget of the macroeconomic shocks. This follows a similar exercise that I undertook with PBO in 2014.

The economic shocks were in the following areas.

  • productivity
  • business investment

Access the reports

Download my report "Economic impacts of selected macroeconomic shocks" (PBO web-site).

Download the full PBO study "2017–18 Budget medium-term projections: economic scenario analysis" (PBO web-site).

Economic Impacts of Selected Macro Shocks:
Sep 2014 report to Parliamentary Budget Office

The Parliamentary Budget Office (PBO) commissioned Independent Economics to analyse the impact of several macroeconomic shocks on key economic parameters that influence the Budget. The outputs of the analysis were then used by PBO to adjust forecasts for those economic parameters. PBO then used its modelling of the relationship between the economic parameters and the Budget to assess the effects on the Budget of the macroeconomic shocks.

The economic shocks were in the following areas.

  • productivity
  • terms-of-trade
  • labour forcer participation

Access the Independent Economics report

Access "Economic impacts of selected macroeconomic shocks".

Macro policy:
insights from our new macro model
20 September 2013

  • these are the first publicly-available results from the all-new Independent Macro-econometric model
  • we assess the current stances of monetary and fiscal policy against an "optimal" model-based benchmark

Current versus Optimal Macro Policy

  • Under the standard policy approach, monetary and fiscal policy follow simple rules, based on inflation and deficit targeting respectively.
  • Under the optimal approach, macro policy is optimised to minimise the social losses from inflation and unemployment departing from their targets.
  • The standard and optimal projections for monetary and fiscal policy are broadly similar.
  • This indicates that the current expansionary stances for monetary and fiscal policy are broadly appropriate.
  • This is unsurprising as inflation is below the RBA target of 2.5% p.a. and unemployment is above its sustainable rate or NAIRU, estimated at 5.2 per cent.
  • However, the results show that it would be optimal to slightly vary the current policy mix, to make fiscal policy less loose and monetary policy more loose.
  • November 2017 update: it is interesting to note that this variation in the macro policy mix was subsequently adopted.

Download the Macro Forecast and Policy Update

Download "Economic Outlook and Current Policy Issues".

For more information, email my office.

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