Bloomie has a nice story today on the golden oldies of Australian interest rate observers holding the line against the youthful bullhawks:
Three of Australia’s foremost market economists — with a century of experience between them — are defying their peers and traders’ bets by predicting the central bank will be forced to resume cutting interest rates.
Hours after the Reserve Bank of Australia signaled it was abandoning a two-year easing cycle, Westpac Banking Corp. (WBC) Chief Economist Bill Evans, National Australia Bank Ltd. (NAB)’s Alan Oster and Bank of America Merrill Lynch’s Saul Eslake were sticking to the view that rising unemployment and the end of a mining boom will drive the overnight cash-rate target lower.
“It’s the wisdom of the oldies,” Oster, a former economist at the nation’s Treasury, said in a phone interview.
…“We have the best data,” Oster said, referring to the major banks. He said he’s not convinced improvements in NAB’s business sentiment gauges will be sustained given that readings of forward orders, wholesale and capital expenditure remain weak.
Oster, Eslake and Evans said a downturn in the mining investment cycle will detract from growth, and said an acceleration in inflation in the fourth quarter is likely to moderate. None expect a sharp decline in the Australian dollar.
…Evans said the U.S. economic recovery may disappoint, while Oster flagged concerns in India and slower growth in China. One of Westpac’s advantages is the ability to make its own global calls, including on the Fed, rather than being constrained by forecasts from overseas colleagues, as is the case with a global bank, Evans said.
“I like to control the Fed view,” he said. “I think the Chinese data is going to lose momentum, and I’m very skeptical about the stability in Europe and the pace of recovery in the U.S.”
Spending cuts by Australia’s new government were also likely to hurt demand, Evans said, while Oster flagged the risk of a “horror budget” weighing on growth.
…In a June 2013 research report, Eslake saw about a 25 percent chance of a recession starting in the second half of 2015, an estimate criticized by then-Prime Minister Julia Gillard. When Evans in mid-2011 called the start of the easing cycle, he was also the outlier in a Bloomberg News survey, with the other economists forecasting an increase or no change.
Exactly right. I guess I’m an old soul trapped in a young man’s body (only 46!).
