Editorial: Treasury needs to be transparent

Finance Minister Grant Robertson. Photo / Mark Mitchell

Treasury needs to be transparent

We should not expect government agencies to predict the future but we should expect them to transparent.

Treasury has been in the gun this week for failing to show its working on key house price forecasts. Its central forecast, that price growth will fall to 0.9 per cent, raised the hackles of Green MP Chloe Swarbrick and National MP Nicola Willis.

Swarbrick sought clarity on how it reached its conclusion. And that seems to be where the real problem begins. Labour MPs blocked efforts to have officials provide the working at select committee.

Belatedly, Treasury has offered a half-hearted summary that has Swarbrick and Willis claiming its methodology was deficient. The forecast isn't actually far out of line with the market consensus.

Westpac economists now see prices falling in the coming year. ANZ is forecasting growth of just 1.5 per cent in 2022. ASB sees growth moderating to 2 per cent — with a risk of prices falling if interest rates rise faster than expected.

Treasury's forecast is also broadly in line with that of the Reserve Bank.

RBNZ Governor Adrian Orr. Photo / Mark Mitchell

Governor Adrian Orr showed none of Treasury's hesitancy in defending his team's forecast. At his last press conference he was challenged on the forecasts and enthusiastically ran journalists through all the key assumptions. He added a caveat that asset prices in the real world are always volatile and that forecasts change when facts change.

Orr later clashed with Swarbrick at select committee. It's unlikely his arguments swayed her, but at least they were all out in the open.

People are free to disagree with forecasts but it's important for public trust that institutions are not perceived to be hiding anything. Had Treasury economists been allowed to speak freely about their forecasts they would almost certainly have explained them articulately and plausibly.

Forecasts can only be based on the past, so always involve judgment calls. And there is also no "off the shelf" model for a global pandemic. We are in uncharted territory.

That doesn't let Treasury off the hook. Its forecasting of Crown expenditure and revenue has also been well off the pace for some time. Crown accounts were already looking better than Treasury's annual Budget forecasts within weeks of their publication. There may be good reasons for this too. It wouldn't hurt to hear them.

At its core, this is a problem of communication — a problem that seems to be plaguing this Government right now. There seems to be a lack of trust around sharing information.
One can understand the desire to avoid key judgment calls being turned into political footballs. But we should be confident that they are free from partisan political assumptions.

Debates about accuracy should be framed with a better understanding of economic nuances. Public trust in Treasury process is crucial for that.

Treasury needs to get on the front foot. And the Government needs to let it.