The Accuracy and Rationality of US and Australian Household Inflation Forecasts: A Comparative Study of the Michigan and Melbourne Institute Surveys

Lloyd B. Thomas and Alan P. Grant

The Economic Record, 2008, vol. 84, issue 265, 237-252

Abstract: Median household 1‐year‐ahead consumer price inflation forecasts generated by the Michigan survey of US households and the Melbourne Institute survey of Australian households are tested for accuracy, bias and efficiency, and compared with naïve forecasts, forecasts derived from financial market phenomena, and forecasts of professional economists. In the post‐1993:1 period which encompasses the Melbourne Institute's 2006 revision of the Australian series, both countries’ household forecasts are unbiased, efficient and relatively accurate. In the earlier period (1978:1–1993:1), the Melbourne series exhibits substantial upward bias. Several potential explanations for the inferior early Melbourne performance are offered.

Date: 2008
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