In December last year, I outlined my forecasts for parts of the economy and financial markets. As the first half of 2014 draws to a close, it is worth having a look at how those forecasts are travelling, notwithstanding the fact that over the past six months, my views on a range of factors have changed as news and events have unfolded.
The 10 points from December 2013 are reproduced below, with comments in italics after each item.
So the smart people like Louis Christopher from SQM Research and Pete Wargent from AllenWargent property buyers were right – the dip in house prices in the 6 week people around May was seasonal. The housing market was still strong and prices were still robust even though the RPData was showing what at face value were notable price falls.
The RPData house price series now shows that prices are up 1.3 per cent so far in June (just one day to go) to largely reverse the 1.9 per cent price drop in May. In recent weeks, the price rises have been solid which suggests further seasonal increases are likely in the near term, especially with interest rates remaining near record lows.
Even the RBA was caught up, a little, with the house price fall discussion, when it noted after the June Board meeting that "dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently".
The chances that the next move in interest rates will be a cut have increased with a raft of news pointing to a moderation in the pace of economic growth, a renewed decline in commodity prices and a clear abatement in inflation pressures from the record low pace of wage growth and the stubbornly high Australian dollar.
While the most likely outcome for monetary policy in the next little while is the RBA holding interest rates steady, another lowish inflation result next month (low being 0.5 per cent or less) would signal a moderation in inflation from the quite worrisome lift evident through to the end of 2013. Indeed, a 0.5 per cent rise in the CPI would see inflation on track to fall to the bottom half of the RBA's 2 to 3 per cent band by the end of 2014.
Such an inflation pull-back fits with very recent news of less robust economic growth since the stellar 3.5 per cent annual GDP result in the March quarter. While it is early days yet, the partial indicators for retail spending, building approvals, employment, job advertisements and business investment have all taken a step lower.
Former greyhound follower and now the economic dwarf at News Ltd's The Herald Sun, Terry McCrann, has been wheeled out of the loonie bin to jump on the tobacco fact denier train.
In an extraordinary error ridden piece of work, McCrann's column today perfectly reinforces his ineptitude and ignorance on most matters to do with the economy.
While Terry is obviously still feeling humiliated over the budget surplus discussion he and I had a couple of years ago (Treasurer Hockey's recent budget confirming my presentation of the facts), in a further lack of self awareness, he trots out the line that down is up and the earth is flat when it comes to the issue of tobacco consumption.
Terry noted that "in the usual cocktail of stupidity and dishonesty, the Kouk cited official statistics".
Readership of The Australian newspaper has reached a record high, according to an industry report obtained by The Kouk.
The confidential report, produced by industry leader Imakethisshitup, confirmed readership has skyrocketed despite sales of the national newspaper sinking to record lows and bird owners complaining of a shortage of suitable newsprint for the bottom of their cages.
The source told The Kouk that the decision to give away three-quarters of all copies of The Australian at airports was a "masterstoke" that drove the readership surge.
The Australian (weekend edition) has again gone hard on the tobacco issue with yet another editorial and the short-poppy Henry Ergas stepping in.
Like the dozen or so articles before them, these columns fail to acknowledge the indisputable fact that the volume of tobacco consumed is falling, including in the period since plain packaging laws were introduced in December 2012.
The editorial takes a weird slant on the issue with a critique of my credentials to analyse the economic data which reveal declining tobacco consumption. In setting the scene, it notes the "sharp minds" of Ergas who taught at Harvard (what subjects and for how long I wonder); Judith Sloan who they say is a former productivity commissioner (again not for long in this tax payer funded role) and Adam Creighton who is a former RBA economist (again, I wonder how long he was there and what role he performed in this tax payer funded role).
I have spoken to the ABS on the issue of the consumption of tobacco and all of my work on this issue is correct, accurate and spot on. Whilst this was never in doubt, I feel the need to take issue with the erroneous material that continues to appear in The Australian.
To his credit, The Australian's Adam Creighton has tried to get to the bottom on the consumption of tobacco issue that has dominated his paper in recent weeks. Apparently he spoke to the Australian Bureau of Statistics and was able to include several quotes from them when crafting his recent column. In using what was enlightening information from the ABS, Creighton however made a fundamental error when he tried to interpret that news.
This, of course, lead him to the wrong conclusions.
The Australian's campaign to torture and misrepresent the data on the volume of tobacco consumed in Australia seems to have had a final nail in the coffin with news from British American Tobacco, no less, that sales volumes in Australia are falling.
In their annual report which covers the period up to 31 December 2013, the BAT report notes:
Profit was up strongly as a result of higher pricing and cost saving initiatives, partially offset by lower volume."
What was that?
BAT saying "lower volumes"?
Oh I see. The volume of tobacco sold by BAT was lower in 2013, a picture that dovtails perfectly with the data from the Australian Bureau of Statistics. Who would have thought that?
Certainly not The Australian writers Christian Kerr, Adam Creighton, Henry Ergas, Judith Sloan, Sinclair Davidson, Chris Merritt, The Editorial writer or the person who puts together the cheeky Cut and Paste column.
See BAT annual report, page 32:
As far as I can tell, only two pieces in today's The Australian on the tobacco issue, but both squarely aimed at muddying the debate on the decline in the volume of tobacco consumed by households in Australia.
Let's have a look at what they are saying.
The editorial in The Australian suggests that I was "defending the effectiveness of the [plain packaging] laws' because I had "a stake in their introduction".
There are a couple of issues here. The Australian's Adam Creighton kindly sent me an email yesterday, where he asked, "did you have any involvement in the development of the plain packaging policy when you were working for Julia Gillard?" My reply was "No - I had zero input as it was a health issue, not economic."
For some reason, The Australian editorial chose to ignore this. What my stake in the issue is remains a mystery.
The other issue is that I have not defended the plain packaging laws. While I think most policies aimed at reducing smoking are worthwhile, I merely noted that the ABS data on the household consumption of tobacco highlighted, in no uncertain terms, the embarrassing errors in Christian Kerr's story in The Australian of 6 June 2014. The volume of tobacco consumed is falling. I did note the plain packaging laws, plus the excise increase, as factors that may account for the obvious fall in consumption.
The Australian has stories from Christian Kerr, Adam Creighton, Sinclair Davison and Chris Merritt in its paper today where they again largely ignore the facts on the consumption of tobacco and cigarettes from the Australian Bureau of Statistics. It seems like overkill when the facts on the matter are so clear, but at least some of the coverage seems to be a little bit nasty and personal.
The Kerr and Creighton article has as its focus a claim that the "anti-smoking measures are driving a boom in cheap cigarettes, with smokers buying more cigarettes from the lowest market segment". They cite Neilsen data to support this claim.
While the Neilsen data do not appear to be publicly available (I suspect The Australian would say it is commercial in confidence), I have no issue with this claim – it may or may not be correct. It is if correct, it does not refute the ABS facts which show a 5.3 per cent fall in the overall volume of tobacco consumed between the December quarter 2012 and the March quarter 2014. This is even if the volume of tobacco consumed has switched to cheap rather than expensive cigarettes.
To help the smoking fact deniers, here is a little illustration about what might be going on. In Period One, consumption of tobacco is 50 expensive and 50 cheap cigarettes (100 in total). In Period Two, consumption shifts to only 25 expensive yet 70 cheap cigarettes (95 in total). Clearly, the overall consumption of tobacco has fallen 5 per cent with a big switch to the cheaper product. This may well be happening if the data cited by Kerr and Creighton is correct and leaves the ABS data and my analysis untouched.