Reserve Bank of Australia official discusses forecasting principles and highlights from recent forecasts

Marion Kohler, Head of Economic Analysis Department, spoke about forecasting and how it is used in central bank decision-making. She highlighted that forecasts are an indicative tool for decision-making rather than pure predictions of the future. There are a number of uncertainties and risks surrounding forecasts which policymakers and the public need to consider. Kohler emphasized the need to understand the principles of forecasting and to recognize that economic models and estimates are typically imprecise. In addition, Kohler highlighted the importance of knowing where you are starting from when making forecasts, as this can be difficult due to the lag between when something happens and when it is compiled into an economic statistic. Finally, she discussed the long and variable lags of monetary policy and the need for central banks to have a view on how the economy will be tracking in the future.