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Scope 2017 economic survey: Stephen Anthony, Bill Mitchell; and Renee Fry-McKibbin tie for forecaster of the year

ANU Economic modeller Renee Fry-McKibbin put faith in the housing market. Photo: Elesa Kurtz Professor Bill Mitchell tipped correctly that wages would stay low. Photo: Simone De Peak
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Industry Super , chief economist, Stephen Anthony picked low growth. Photo: James Boddington

ANU Economic modeller Renee Fry-McKibbin got house prices pretty right. Photo: Elesa Kurtz

Professor Bill Mitchell picked very low wage growth. Photo: Murray McKean

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In most years there’s room for one forecaster of the year. But not in 2016. Hardly any of our panel picked the dive in ‘s growth rate to 1.8 per cent or the dive in the cash rate to a record-low 1.5 per cent. Wage growth was lower than all but the most pessimistic of the forecasts, and house prices ended the year far higher than the highest.

But at their best, three of our panel got just about everything right.

Stephen Anthony of Industry Super (a two-time forecaster of the year) was right about ‘s very low economic growth rate. He picked 2 per cent for the year to December. He was also right about the cash rate, one of only five who expected it to slip 1.5 per cent. And he was right about the timing. He predicted one cut in the first half of 2016 and one in the second.

But like most he was far too cautious on house prices (expecting growth of only 3.5 per cent in Sydney and 6.5 per cent in Melbourne), far too keen on a low dollar (expecting 62 US cents instead of 72) and pessimistic about commodity prices, expecting a slide in the iron ore price to $US33. In fairness, few people expected the late-year surge in commodity prices, and none of our panel.

The ANU’s Renee Fry-McKibbin got house prices pretty right. The typical forecast was for the CoreLogic measure of Sydney prices to climb 2 per cent and for the Melbourne measure 3 per cent. The year ended with prices up 15.5 per cent and 13.7 per cent. The Housing Industry Association and the property specialist BIS Shrapnel were as wrong as the rest of them, picking around 6 per cent and 3 per cent. Fry-McKibbin picked 10 per cent and 9 per cent, and she got housing investment pretty right as well.

She says with money cheap she could see nothing that would slow prices down. New home building was high but it takes a while, and a while to provide infrastructure to new suburbs. This year she is going for 12 per cent and 10 per cent.

Bill Mitchell of Newcastle University’s Centre of Full Employment and Equity is the third of this year’s three-pack. He was darn close on n economic growth, the closest on US economic growth, and the closest on record-low wage growth, picking an ultra low 2 per cent, close to the 1.9 per cent recorded in the year to September. He also hit the bullseye on the 10-year bond rate, picking 2.7 per cent, which is where it ended up.

He says low wage growth would have been obvious to anyone who wasn’t seduced by the fairly steady unemployment rate. Underemployment had been climbing, tens of thousands of people had left the workforce who would have once been in it, and what jobs growth there was had been concentrated in part-time jobs that were typically non-unionised where workers had low bargaining power. This year he is predicting wage growth of 1.8 per cent, less than the rate of inflation, meaning earning power will shrink.

He says the low bond rate was also obvious, given auction data showing queues of traders wanting to buy risk-free assets. For all the talk about the need to attract foreign capital, ‘s government finds it pretty easy.

There are three honourable mentions: Shane Oliver was also close on wages, Jakob Madsen was spot on in predicting an outsized fall in mining investment of 40 per cent, and Stephen Koukoulas had the highest iron ore price. At $US58 a tonne it was higher than anyone else’s, but still far short of what happened.

Arise Bill, Stephen and Renee, and may one of you not need to split the award next time.

Peter Martin is economics editor of The Age.

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