From the AFR:
Paul Dales, one of the few economists to correctly call the Reserve Bank of Australia’s (RBA) only rate cut this year, has made another big call: a Brexit will have little impact on global markets.
…The biggest risk is the break up for the European Union, but that has nothing to do with Britain and the real issue is how the EU will deal with it all, he says.
Dales also has a very upbeat view on the US economy and thinks the Federal Reserve will be raising rates a little quicker than most expect. He thinks the fed funds rate will be 2 per cent by the end of next year compared with 1 per cent that is currently priced into financial markets.
“The US is the one outlier when it comes to inflation. It has recovered a lot faster and because it’s a big domestic exposed economy it doesn’t have the risk of importing inflation.”
Dales is also more optimistic on China despite the view built up during the past 12 months or so that there is going to be a hard landing.
“Over the next year or two it will be treading water and not weaken much further,” he says.
Dales says the global outlook informs his local views. While some economists might lose themselves in the local data, including retail sales, GDP and house prices, to get a handle on it all, Dales takes a look at what the big trends are around the world.
It’s a relief that MB is not the only one that operates in this way. But despite Mr Dales doing a solid job he has been too hawkish and bullish all along and still is:
- Brexit would be a disaster were it to happen, not immediately but over time, for the euro;
- the US economy has approximately zero chance of seeing rates at 2% next year. Stock markets will crash long before we get there;
- China is going to slow further through H2 though we may well see another round of stimulus next year. After the 2017 Plenary we suspect the growth downshift will be much faster, and
- Aussie rates are going as low as they can go, which may be 50-75bps or all the way to zero in a mad world.
MB has been miles head of Capital Economics and everyone else on all of these things for five years, as well as offering the only economic narrative of any sense to understand Australia’s struggles post-GFC yet the only mention we get is the odd reference from Chris Joye at his most radical and a few anonymous insults.
We’re quite often cited in the Financial Times and often across the US blogopshere, we often advise the who’s who of hedgies and some governments on Australia but we get nuthin’ back home.
Where’s our kiss-arse profile, AFR?
