Dodgy forecasting


13 March 2008


A few years ago I did some forecasting work for a commonwealth government department and found that they were forecasting a $5 billion budget using the FORECAST command in Excel. Worse, they were fitting a regression through only three observations and they were not even the most recent observations.

It seems a similar thing has happened again. The Victorian government is projecting water consumption based on a regression through three observations. Kenneth Davidson in today’s Age reports that “The Government predicts a water supply crisis based on running a regression curve through the three drought years of 2004-2006, which shows the reservoirs that supply Melbourne drying up by 2010.” Who produces this nonsense and why doesn’t the government seek proper advice from professional statisticians?

At least the commonwealth government did perceive that there was a problem, which is how I got involved. But the Victorian government seems to have another agenda, and responsible statistical analysis is not part of it.