The economy is a complex beast, and even forecasts based on solid theory and evidence can get the timing wrong. Here’s just a quick snapshot of some economic forecasts from a year ago to lighten the mood as we head this week into the National Accounts (Wednesday).
Bill Evans – Westpac Chief Economist – 3 September 2010
At present we are expecting rates to rise by 75 basis points during 2011. Markets will need to adjust a long way to accommodate that view.
What happened? Interest rates have been on hold all through 2011, with markets factoring in a 25bp drop at the October RBA Board meeting.
Peter Jolly – NAB Head of Global Research – 4 September 2010
Our year ended GDP forecast has lifted to 3¼% from a little under 3%. As a consequence, we debated whether the 100bps of tightening in our forecast starting February 2011 was enough. We think it is, but it did remind us that a 2010 hike remains possible should either a) Q3 inflation in late October be shockingly high or b) the economy grows above trend in the 2nd half and the unemployment rate (now 5.3%) plunges through 5% – quite possible.
What happened? Full year GDP in 2010 was 2.70%
Christopher Joye – Rismark – 23 Aug 2010
The economy is about to embark on a period of above-trend growth (mean of the ABS trend measure since June 2000 is 0.7%/qtr or 0.4%/qtr/capita)
What happened? Average GDP growth since that time is -0.1%/qtr or -0.4% in per capita terms.
Warren Hogan – ANZ Chief Economist – 1 September 2010
The consensus seemed to be that the Reserve Bank will be happy to sit pat for six months and then raise rates by 100 basis points through next year. The ANZ’s Warren Hogan was the hawkish outlier of the group, predicting 150 or 170 points over the next 18 months.
Hogan believes we are about to see a period of serious inflationary pressures thanks to the commodities boom’s income wave – the CBA’s Michael Blythe reckons the income surge will add 3 or 4 per cent to GDP over the next couple of years
What happened? Interest rates flat all year with cuts priced in. Inflation pressures are on the rise. Commodities boom is not quite delivering as promised, yet.
Dr Frank Gelber – BIS Shrapnel Chief Economist – 7 September 2010
Interest rates are set to rise and commercial property values will skyrocket. “I’ve never seen a lower risk, higher prospective return, in the commercial property market, ever,” he said. “We’re looking at rents and property values doubling in Sydney and Melbourne over the next five years.” [commercial property]
What happened? Interest rates flat, although some rebound observed in Sydney and Melbourne commercial rents and prices (at a rate below inflation).
Rumplestatskin AKA Cameron Murray –Economist, blogger September 2010
Inflation and GDP will surprise on the low side in the September quarter. Remember, the June quarter had a booming terms of trade (which is now languishing), fiscal stimulus (which is now finished) and two interest rate moves by the RBA which could drain consumer confidence and spending, especially when combined with house price nerves and debt concerns. Therefore I expect the RBA to keep rates on hold for the next 6 months (with some independent upward moves of mortgage rates by banks), with a possible stimulatory move by the RBA next year.
What happened? Inflation and GDP did surprise on the low side that quarter. I was off the mark with the Terms of Trade languishing, although its rapid growth did pause in that period. The RBA moved rates in November (missed that), and bank did independently raise interest rates around that time. Rate cuts now priced in for October 2011.
From this morning is my favourite recent effort, which seems to be a bullish call on the GDP figures to be released this week:
Adam Carr – ICAP 5 September 2011
They constantly harp on about the non-mining recession (of which there isn’t one), tell us that consumers have put their wallets away (when they haven’t) and then if that weren’t enough, talk continually (that is, for two or three years and counting so far) about the prospects of a meltdown in China (despite sold growth, trade and industrial production figures over that period).
While it is nice to hear some optimism about the economy these days, I will simply remind Adam that GDP is still below its September 2010 peak and was falling on the March 2011 figures. For GDP to be positive over the year to June 2011, GDP needs to be 0.4% for the June quarter (in Wednesday’s release), and in per capita terms needs to be 1.3% over the quarter. While it might not be recession, the past year has definitely no been a reversion to pre-GFC trends. As far as China goes, Adam may be right that China continues on its current path longer than many believe possible.