The forecasts are sharply at odds with the pricing on the futures market which has rates falling seven times by mid next year and then climbing barely at all.
Elected by their peers to the Australian Business Economists executive committee, the 15 forecasters work for big firms including the Macquarie Group, Deutsche Bank, JP Morgan and the Westpac, Commonwealth, National Australia and ANZ banks.
Presenting the median forecasts to the annual forecasting conference in Sydney Colonial First State economist Stephen Halmarick stressed the range of the forecasts was wide, something to be expected in uncertain times.
The lowest cash rate forecast was 3.75 per cent, implying three more cuts in the year ahead. The highest was 4.75 per cent, implying two more hikes.
The committee is bullish about the year ahead, expecting economic growth to accelerate from 1.4 per cent this year to 3.3 per cent in 2012 and 3.5 per cent in 2013. Both forecasts exceed those made by the Reserve Bank earlier this month...
Treasury economist David Gruen spoke of a “boom and gloom” mentality saying the benefits of the mining boom were widespread than realised. Not only was unemployment lower than it had been for years but the dispersion of unemployment rates across geographical regions was lower than it had been for years.
Reserve Bank governor Glenn Stevens told the conference inflation had good chance of being between 2 and 3 per cent throughout next year with a “slightly greater
probability” it would end up above 3 per cent in 2013.
He would prefer warning labels or estimates of probability to be attached to forecasts.
“We all want to believe that someone, somewhere, can tell us what to expect. The truth is the best we can do is speak about likelihoods,” he said.
Published in today's SMH
ABE 2011 Forecasts
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