In October 2017, the Western Australian Department of Treasury commissioned Deloitte Access Economics to undertake a Review of its forecasts or iron ore royalties, payroll tax, transfer duty and land tax.
The report compares the Department of Treasury’s forecast performance, methods and governance with a range of other forecasters, including, where relevant, forecasts prepared by other State Treasuries, the Commonwealth Treasury, the Commonwealth Department of Industry, and private sector organisations.
The report notes that forecasting revenue in Western Australia is more challenging than at the national level or in larger States, because of Western Australia’s more volatile revenue base. Moreover, the challenge has increased since the turn of the century because very strong expansion in the State’s resource sector has increased revenue volatility.
While the report notes that at various times revenues have been both under-estimated and over estimated, it finds that in general Treasury’s forecasting approach and performance, governance and processes are comparable to standards in other jurisdictions.
The Review has nonetheless suggested a number of changes to forecasting methods and processes, ranging from broader industry consultation to inform Treasury’s forecasts, conducting regular external reviews of Treasury’s forecasting performance and models, and incorporating additional information in models for specific taxes.
In a number of cases, Treasury had already identified, and undertaken work on, improvement opportunities suggested by the Review.