8 September 2022
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The growth outlook Spring is upon us or almost here depending on the starting date you use, and improvements in the temperature can often lead to generally improved sentiment which may lead to a slightly improved economy. The links are a bit tenuous and too often people get focussed on specific factors thinking they will hugely determine where things are headed. The job of us economists is to acknowledge special factors and seasonal influences but concentrate on the broader underlying trends to gauge generally what lies ahead and what people should consider as they make their plans. We have to my mind decidedly proven over the past 15 years that we cannot reasonably predict changes in the pace of economic growth, inflation, interest rates, or of course exchange rates. Best add oil prices, minerals prices, dairy payouts beyond one season, and to a great extent house prices. We know we can’t do these things – but people nonetheless keep asking for forecasts even right
after we describe the way things in the past turned out vastly different from what we anticipated. It all comes down to reasonable risk management and the ability for all parties down the track to be able to say that at the time such and such a thing was the reasonable action to take in light of what we knew at the time and where things looked like they were headed. So, keeping that caveat in mind, when we look towards where the economy is headed there will be some people who might be getting excited about things based on the weather getting better. Most however will continue to wallow in the dominant negative factors for all the rest of this year towards the middle of 2023. Identifying the negative factors is never hard. We humans have a natural tendency to focus on the negatives and the media play them back to us. Keeping on eye on the positive factors is generally more difficult.