The forecasters themselves can’t be blamed entirely for failing to pick the iron ore spot price, which surged after a shock tailings dam collapse in Brazil in late January. The tragic event killed 270 people and resulted in several mines closing down, reducing supply. Brazil is a major rival exporter of iron ore and these events offshore drastically affected Australia’s current account balance and terms of trade.
But another area where most were blind-sided was the RBA’s move to cut rates from 1.5 per cent at the beginning of 2019 to 1.25 per cent by June and 0.75 per cent at the end of the year.
The cuts surprised 15 of those on the Scope panel who predicted the RBA would keep the cash rate on hold at 1.5 per cent until June 2019, and 12 forecasters who thought there would be no change or rate hikes by December.
However, both Kingston University’s Steve Keen and Market Economics’ Stephen Koukoulas accurately tipped the rate to be cut to 0.75 per cent by the end of last year.
Among the panel, there were two other economists who deserve an honourable mention. Industry Super chief economist Stephen Anthony, who has won the title of forecaster of the year for several consecutive years, and BIS Oxford Economics chief economist Sarah Hunter were spot on for some of their estimates.
Both tipped mining investment to fall by 9.2 per cent and 9.5 per cent respectively, compared to the actual decline of 9.5 per cent. Ms Hunter accurately tipped underlying inflation to be 1.5 per cent in the year to June 30 and the consumer price index to jump by 2.1 per cent.
Mr Anthony was the only panel member to anticipate a 0 per cent change in housing investment and he was 0.05 per cent away from estimating China’s 6.3 per cent GDP growth.
“I got it wrong,” Mr Anthony said about several of his predictions. “[After making the predictions] you can do all sorts of justifications, it’s very difficult.
“Given asset prices are sky high, given monetary policy is unconventional and the RBA is considering experimenting, you sort of wonder if we aren’t in an era of a clustering of volatility.”
Ms Hunter said the issues in Brazil were “not something you can forecast”, which knocked out many of the panel’s forecasts, but also said the RBA’s change in view about inflation and the labour force prompted an unexpected easing cycle.
“It’s quite a high-level shift we didn’t know this time last year,” Ms Hunter said.
Mr Anthony said the US Federal Reserve’s moves to ease rates and adopt unconventional monetary policy tools had also been unpredictable.
Now a year on from the 2019 survey and both of these esteemed forecasters agree the future is looking even less certain.
“We’ve started the year with bushfires and coronavirus – they are way out there in terms of normality,” Mr Anthony said.
Ms Hunter said it was “definitely” trickier to forecast in 2020 as there were many factors that could go either way in terms of easing or worsening.
“The US election is later this year and we’re not even talking about that yet,” she said.
Jennifer Duke is a media and telecommunications journalist for The Sydney Morning Herald and The Age.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra