10 ] there is empirical evidence that confidence intervals formed by first choosing a central case and then overlaying two - sided intervals around it are more vulnerable to overconfidence bias than confidence intervals chosen without such prior ‘ anchoring ’ to a central estimate : see, for instance, kahneman d ( 2011 ), thinking, fast and slow, farrar, straus and giroux, new york. [ 11 ] for further examples of the rba ’ s work in this area, see : tulip p and s wallace ( 2012 ), ‘ estimates of uncertainty around the rba ’ s forecasts ’, rba research discussion paper no 2012 - 07 ; rba ( 2022 ), ‘ box c : what explains recent inflation forecast errors? ’, statement on monetary policy, november ; rba ( 2023 ), ‘ box b : has the economic outlook evolved as forecast a year ago? ’, statement on monetary policy, november. the importance of building such learning into monetary policy deliberations in a systematic way was underscored in the recent bernanke review of forecasting at the bank of england : see bank of england ( 2024 ), ’ forecasting for monetary policy making and communication at the bank of england : a review ’, 12 april ; kanngiesser d and t willems ( 2024 ), ‘ forecast accuracy and efficiency at the bank of england – and how errors can be leveraged to do better ’, bank of england staff working paper no 1078. [ 12 ] this obviously assumes that the market projections are not simply copied from the rba ’ s! [ 13 ] experience in other countries is discussed by chris giles in his recent financial times piece : giles c ( 2024 ), ‘ learning to trust the forecasts ’, financial times ( online ), 30 july. [ 14 ] of course, demand is a latent variable too. and there are many other ways in which the supply judgment could be wrong – most obviously if the phillips curve is a poor model of reality. that is why it is important for policymakers to be explicit about the judgments they are making, so the sensitivities of their projections to those judgments can be understood and critiqued. [ 15 ] most take signal directly from inflation or wage out - turns, but many also incorporate other indicators that provide a read on supply, such as labour productivity. for further information see ballantyne a, a sharma and t taylor (

the world, in economics, politics, education and technology in the next twenty years ’. in what seems to have been the clincher, he noted that ‘ economics ranks next after cricket as a topic of public interest ’. nearly 100 years later, i ’ d change little in describing my own early impressions of australia, with one notable exception : sport quite often plays second fiddle to economics ( and the rba ) on the front pages! a vibrant public economic debate, with diverse views, is healthy. but one feature of the landscape is less desirable – and that is the extraordinary certainty with which individual views about the outlook for the economy and the path of monetary policy can sometimes be expressed. ‘ the economy is falling off a cliff ’ ; ‘ no – the economy is red - hot. ’ ‘ rates up now – we ’ re way behind the curve ’ ; ‘ rates are clearly far too high – slash them ’ ; ‘ it ’ s vital rates stay where they are ’. those seeing things differently are castigated as incompetent, biased or on the make. and changes in view are presented as disastrous or humiliating failures. in short, it ’ s a world of winners and losers, gurus and charlatans, geniuses and buffoons. this isn ’ t unique to australia of course – everywhere is prone to it in some way ( witness the extraordinary calls for emergency intra - meeting rate cuts in the united states during the recent market turbulence, for example ). of course, eye - catching language sells newspapers, secures clients and draws crowds to the soapbox. but when the stakes are so high, claiming supreme confidence or certainty over what is an intrinsically uncertain and ambiguous outlook is a dangerous game. at best, it needlessly weaponises an important but difficult process of discovery. at worst, it risks driving poor analysis and decision - making that could harm the welfare of all australians. it is right to want to be confident that the central bank will bring inflation back to target and maintain full employment : that is the rba ’ s mandate, and we should be held to account for it. but the policy strategy required to deliver that outcome, and the economic judgements that inform it, simply cannot be stated with anything like the same degree of certainty. those pretending otherwise are false prophets. overconfidence is not unique to economic commentary : it ’ s a universal human failing. [ 5 ] in my remarks today, i want first to illustrate some