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Predicting the Aussie economy: Who’s been getting it right?

Some well-known Aussie economists have been getting their predictions right on point, while others… not so much.

Australian currency and a crowd of people walking to represent the economy.
Predicting what will happen to the Aussie economy is a tough job. (Source: AAP / Getty)

Trying to predict what will happen to the Australian economy has been a tough job over the past few years.

Between COVID shutdowns and the war in Ukraine, things have been volatile to say the least. But some economists got their 2022 predictions spectacularly right while, sadly, others got them horribly wrong.

The latest Fool Or Forecaster Report, which is released every April Fools’ Day, analysed troves of data around property prices, interest rates and inflation.

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The report found a number of standout forecasters. Here’s who got their predictions bang on the money:

  1. Christopher Joye (Coolabah Capital) forecast in October 2021 that the Reserve Bank (RBA) would start tightening in mid-2022, and that this would lead to property price falls.

  2. Warwick McKibbin (Australian National University) and Adrian Blundell-Wignall (Sydney University) forecast in January 2022 that the RBA would start increasing the cash rate in the first half of the year.

  3. Stephen Koukoulas (Market Economics) forecast in January 2022 that national house prices would fall 5 to 7 per cent in 2022.

  4. Mark Crosby (Monash Business School) forecast in January 2022 that Sydney and Melbourne property prices would fall 10 per cent in 2022.

However, at the same time, there were some economists whose 2022 predictions turned out to be flawed:

  1. Peter Tulip (Centre for Independent Studies) forecast in January 2022 that inflation would be 2 per cent in 2022 and the RBA would start increasing the cash rate in 2024.

  2. Stephen Anthony (University of Canberra) forecast in January 2022 that inflation would be 2.4 per cent in 2022 and the RBA would start increasing the cash rate in 2024.

  3. Craig Emerson (Victoria University) forecast in January 2022 that inflation would be 2.75 per cent in 2022 and the Reserve Bank would start increasing the cash rate in 2024.

  4. Andrew Wilson (My Housing Market) forecast in February 2022 that it was “absolutely nonsensical” the RBA would raise the cash rate as early as August 2022.

  5. ANZ forecast in February 2022 that national house prices would rise 8 per cent in 2022.

  6. Margaret McKenzie (Federation University Australia), Mala Raghavan (University of Tasmania) and Renee Fry-McKibbin (Australian National University) forecast in January 2022 that Sydney and Melbourne property prices would each rise at least 10 per cent in 2022

The Fool Or Forecaster Report is published by The Elephant in the Room property podcast, which is hosted by property and finance professionals – buyers’ agent Veronica Morgan and mortgage broker Chris Bates.

Morgan said the annual report was designed to hold experts accountable for their predictions.

“Economists are smart people who are skilled at analysing data, so you’d assume their forecasts would be accurate most of the time. But if you look back at their forecasts after the event, you’d be shocked to discover just how often they’re wrong,” she said.

“However, the general public doesn’t realise this because economists are rarely held to account for their forecasts. I suspect most economists don’t even realise how bad they are at making predictions, because they’re always so busy making new forecasts that they don’t have time to review the old ones.”

Bates described RBA governor Philip Lowe as the perfect example of a flawed forecaster.

“If there’s anyone who would’ve been expected to know when the Reserve Bank was going to start lifting rates, it would’ve been the governor, but his forecasts turned out to be wildly inaccurate,” he said.

“The RBA started increasing the cash rate in May 2022. But, in October 2021, Dr Lowe said the conditions needed to start increasing the cash rate would probably ‘not be met before 2024’. After the March 2022 monetary policy meeting, he said the board was ‘prepared to be patient’ about when it would start lifting the cash rate.

“This is not meant as a personal attack on Dr Lowe or the other economists, because they’re very smart, credible people. Rather, it’s to point out how difficult forecasting can be, because there are so many variables at play.”

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