Of the many definitions of “economist”, the best of them claims that an economist is someone who will tell you tomorrow why what they predicted yesterday didn’t come true today.
This reality of economists constantly getting it wrong with their forecasts, but refusing to admit they were wrong, is seen pretty much every day in Australia.
Economists constantly clutter the media channels with forecasts on all manner of things economic, financial and real estate – but are notable for their lack of ability to accurately predict almost anything.
If credibility for an economist is measured by their ability to get it right with their forecasts, then very few economists in Australia have any credibility at all – and the ones with the lowest credibility are those working for the major banks, or major institutions like AMP Capital which is remarkably bad at predicting things.
The subject on which they all have the worst track record is property prices.
But economists get away with it because journalists NEVER hold them to account.
A striking example of all this was played out on ABC television on the evening of 4 April.
This was the day that the Reserve Bank board met and decided, for the first time in a year, NOT to increase the official interest rate.
Now, for most people, this was a good news story. After 10 consecutive interest rate rises, it appeared that at last the Reserve Bank had decided that enough was enough, with relief for households across Australia.
But the ABC managed to turn this into a bad news story.
And they achieved this by interviewing a big bank economist who had wrongly forecast that the RBA would lift interest rates again – but was unwilling to admit that they had got it wrong, despite the cold hard facts.
The ABC interviewed Adelaide Timbrell, described as a senior economist with ANZ Bank.
Poor Adelaide was absolutely bristling with indignation that the RBA board had not followed her advice and lifted interest rates when, according to her, they should have.
The ABC allowed this rant of disgruntlement to continue for nine minutes. Rather than present the good news to the people of Australia, the ABC devoted the first nine minutes of a 30-minutes news bulletin to a rant about why it was all a mistake.
Which showed remarkably poor judgment by everyone involved.
The greatest mystery is why journalists would consider ANZ economists to be worthy of credibility, based on their forecasting track record, including the reality that they had failed to forecast what the Reserve Bank would do on 4 April – despite all the clear signals that Philip Lowe and his cohorts were planning to pause their interest rate increases.
Let’s have a look at the track record of ANZ Bank economists, usually represented by Adelaide Timbrell and Felicity Emmett, in predicting real estate prices.
Early in 2020, when Covid first appeared in Australia, the ANZ economists went public to advise that capital city house prices would fall 13% in 2020.
But by the end of the year, prices nationally had RISEN 6% and a number of the capital cities had recorded double-digit rises in house prices.
Then, at the start of 2021, when it was clear to most of us that a property boom was under way, the usual suspects at ANZ forecast that house prices would rise 9% in 2021, but only 7% in Melbourne and 8% in Sydney.
By the end of 2021, prices nationally had risen 25%, with Sydney rising not 8% as predicted by ANZ but 30%, and Brisbane rising not 9% as forecast but also 30%. Some locations across Australia grew more than 40%.
Clearly, the best minds at ANZ did not see the property boom coming, even though most property specialists did see it clearly because it was really, really hard to miss.
How could the ANZ boffins have missed something so obvious?
Fast forward to August 2022 and there were headlines around Australia such as “ANZ predicts epic national property price crash”.
ANZ generated masses of free publicity by predicting that property prices nationally were going to head south in a major way, with Sydney to fall 14%.
Here we are eight months later and clearly they are wrong again – with the latest price data showing prices turning upwards, including a 1.5% increase in Sydney in March alone.
Most Australia market jurisdictions have house prices higher than they were a year ago, according to multiple research sources, with the emerging trend one of growth rather than decline.
So the ANZ forecasts for house prices in 2023 – which is for prices to be falling massively everywhere, including 17% in Adelaide and 12% in both Perth and Brisbane – are likely to be not only wrong, but spectacularly wrong, AGAIN.
The big question is how these people keep their jobs when they are so bad at what they are paid to do.
And why media like the ABC continues to give them credibility they clearly do not deserve.
