The Centre of Policy Studies conducts biannual forecasts of the Australian economy using the MONASH model. The results from these forecasts are used both as input to the Centre's labour market forecasting program and as no-policy- change base-case forecasts in contract research projects. For the latest forecasting round, selected results (such as forecasts of output and employment by industry) can be obtained by emailing James Giesecke.
Details of the MONASH forecasting methodology can be obtained by downloading the model
documentation from the MONASH model webpage. In summary, the
preparation of the forecasts can be viewed as occurring in two stages: an historical
simulation, and a forecasting simulation. In the historical
simulation, the model is forced to track the detail of industry and commodity
outcomes over a period of recent history, as observable from ABS data. This allows the
model to calculate the outcomes for sectoral variables describing (typically
unobservable) features of the economy's structure, such as industry production
technologies and household tastes. The results for these technology and taste variables
in the historical simulation are then used to inform decisions for their forecast values.
The MONASH forecasting methodology also makes extensive use of independent forecasts from
expert groups specialising in the analysis of different aspects of the economy. These
include: macroeconomic forecasts from Access Economics, Treasury and other macro
analysts; ABARE commodity forecasts; forecasts of tourist numbers from the Tourism
Forecasting Council; and forecasts of tariff rates from the Productivity Commission. The
forecasts also take account of the effects of anticipated secular trends, such as the
impact of population ageing on demands for health services.