Why is GDP typically revised upwards?

Philip Franses has recently published an article tackling the question: Why is GDP typically revised upwards? The article investigates revisions to GDP growth over a three year period beginning in 2005 for the Netherlands. The average revision over this period was 0.67.

This is a very interesting article as it reminds us that economic data is not as precise as some people think it is.

Philip Franses suggests two reasons for the imprecision, one, the behaviour of forecasters who have to fill in the missing values and two, the method of collection.

What does this mean for Australia? Can we expect the most recent GDP estimates to be revised up?

I don’t think the findings in this article infer anything about Australian GDP figures. Although, it is interesting to note, despite the overall average adjustment in Netherlands GDP growth being positive, the last two adjustments corresponding to the end of 2007 were negative. Interestingly, this period corresponds to onset of the GFC. Therefore, one may conclude that revisions are up in good times and down in bad times. Only time will tell whether this is also true for Australia.