Here’s a great response to the recent news from Deloittes about the end of the mining boom in two years.
By Terry Ryder
Tuesday, 31 July 2012
Things have moved on since a Shakespearean character in King Henry VI advocated “the first thing we do, let’s kill all the lawyers”.
These days the prime imperative is to get rid of all the economists.
I can’t think of another profession so guilty of earning money on false pretences.
Newspapers fill up large chunks of daily space with the predictions of people whose track records are quite appalling.
The outlandishly inaccurate forecasts of the nation’s most talentless profession are made worse by the suspicion that many commentators don’t really believe what they’re saying. Their objective is to generate media sound bytes. Something sensationally negative usually does the trick. Truth is optional.
I still have the forecasts of economists about interest rates last year ringing in my ears. If they’d been right, Australia would have had multiple rate rises in 2011. The year ended without a single rise, but instead, two rate cuts.
Never in the history of human conduct has so much been wrongly predicted by so many, for the benefit of so few.
The weekly pattern of economic reportage is this: economists publish their tips about the upcoming release of data by the ABS; the bureau announces the latest figures on unemployment or economic growth or building approvals; and then economists fill up news pages with their exclamations of surprise, if not disbelief, at how different the official figures were from their predictions.
Economics is indeed the art of explaining tomorrow why the predictions they made yesterday didn’t come true today.
The short explanation is: they haven’t the faintest idea what’s going on.
The greatest mystery in Australian media is why journalists continue to give credibility to talking heads who constantly blunder.
The bottom line is that newspapers don’t give a damn, as long as there’s a pithy quote and a cheap headline in it.
So the chattering economist who got it horribly wrong last week can line up in front of cameras again this week to deliver another burst of misinformation. Accuracy is not only optional, it’s downright inconvenient.
One of the greatest offenders is Deloitte Access Economics, whose talking heads apparently believe there’s no such thing as bad publicity.
A major metropolitan newspaper this week described the firm as “Australia’s leading private-sector budget forecaster”. Despite my cynicism about economists, I had no idea the state of economic analysis in Australia was this bad.
If DAE is the best, we’re doomed.
The firm’s head media junkie Chris Richardson, the pin-up boy for economists who cherish getting it wrong in a spectacularly noisy fashion, will be remembered for his January 2009 media grab that “the budget is buggered”.
This was part of the firm’s promotional effort for its Quarterly Business Outlook, which predicted Australia would fall into recession in 2009. The economic boom, it said, would “unwind scarily fast”, corporate profits would halve and hundreds of thousands would lose their jobs.
“Batten down the hatches,” it declared. “This is not just a recession. This is the sharpest deceleration Australia’s economy has ever seen.”
Oh dear. You’d think anyone who had got it so wrong would be a bit gun-shy about microphones and cameras thereafter.
Hell no. This is about corporate profile, not credibility. And this week the firm delivered another prediction about the budget and the national economy.
Naturally, its bold declaration that the budget surplus has evaporated and the mining boom had only two more years to run was regurgitated without hesitation by an adoring media.
“The strong bit of Australia’s two-speed economy won’t stay strong for more than another two years or so,'” DAE confidently misinformed us.
If you want proof that the exercise is more about headlines than economics, the reference to a “two-speed economy” is all you need. No serious expert attempting genuine analysis would resort to this cheap creation of a shallow media.
As for the so-called boom in the resources sector running out in two years, I’m willing to predict it will this be with us when my grandchildren are my age.