Developments in the global financial crisis have been so rapid, Treasury has not formally adjusted its forecast for economic growth since September, a Senate hearing has been told.
However, forecasts are now being finalised for the Mid-Year Economic and Fiscal Outlook (MYEFO), which will be released next month, Treasury executive director of the macroeconomic group David Gruen said.
"We could have locked ourselves in a room with our September forecasts and the new information that had accumulated since they were finalised and spent two or three days coming up with a coherent set of new forecasts,'' Dr Gruen said in an opening statement.
"Had we done so, however, it is clear that international events were moving so rapidly that, when we emerged from that hypothetical room after a couple of days, we would have wanted to rip the forecasts up and start again.''
As it stands, the latest GDP forecast for 2008-09 made after the June quarter national accounts that were released in September had a "2'' in front of it, he said.
"As the Prime Minister has told the House of Representatives, the growth forecasts in September ... had a '2' in front of them,'' Dr Gruen said.
This forecast was agreed by the Joint Economic Forecasting Group (JEFG), which is chaired by Treasury and has representatives from the Reserve Bank of Australia, the Department of Prime Minister and Cabinet, the Department of Finance and Deregulation, and the Australian Bureau of Statistics.
The 2-something% compares with the 2.75% forecast for gross domestic product at the time of the May budget.
"Between the budget and early September, there had been a gradual accumulation of evidence suggesting both that problems in global financial markets were becoming more severe and that the likelihood of a serious economic slowdown in the advanced economies, particularly in the United States, were advancing,'' Dr Gruen said.
"In addition to the forecasts themselves, the JEFG Report presented to the treasurer contain a considerable discussion of the risks to the economic outlook stemming from both the financial market disruption that had already occurred and the possibility that more might occur.''
AAP
