ATo my mind, that’s the bigger story.
All the subsequent years are where you make a lot of estimates—you extrapolate, you make assumptions—and that’s where you can go wrong.
Now, things have become a little confusing because you have that one problem, which is pointing to a problem that already existed earlier.
So I have two problems working together: the problems of the past and the problems with the new methodology.
You need to have more data under the new methodology to be able to disentangle this.
A
To my mind, that’s the bigger story.
The base years are the ones where you actually do a full estimate. All the subsequent years are where you make a lot of estimates—you extrapolate, you make assumptions—and that’s where you can go wrong. That happens.
What was surprising about this base revision was the size of the change. Normally, we expect two or three per cent up or down, not very much more than that. Last time, I think, it was about two per cent up. This time, it is seven per cent down.
That’s a large number. What it means, in effect, is that between 2011-12 and now, we have been systematically overestimating growth.
And the question in my mind, which is an important one, is: can we identify what caused that overestimation?
This was not deliberate. There was something in the way things were being done that resulted in this overestimation, and that needs to be identified and fixed.
That really is the big story.
Now, things have become a little confusing because you have that one problem, which is pointing to a problem that already existed earlier. And now you have changed the methodology.
So I have two problems working together: the problems of the past and the problems with the new methodology. Disentangling the two is going to be an issue, and I don’t think it can be done in a short time.
You need to have more data under the new methodology to be able to disentangle this. So the problem is that it has become more complex.
