Economic predictions are a bit like sporting stats - you can tailor them to whatever you want the message to be.
Take the recent swathe of predictions about the housing market. Let’s start with the market analysts. CoreLogic for example is on record as saying that the housing market is showing “signs of slowing.”
CoreLogic Home Value Indices reported “…a 0.8 per cent rise in dwelling values over the June quarter; the lowest quarterly growth rate since December 2015”.
“A controlled slowdown in housing market conditions would provide some comfort to policy makers that new macroprudential constraints are working to cool the high rate of capital gains in Sydney and Melbourne.”
CoreLogic went on to predict that “Slower housing market conditions and improvements in employment markets are certainly positive outcomes, however if wages growth and inflation remain subdued we can expect the cash rate to remain on hold over the short term.”
Then there are the comments coming from across the Pacific with the president of the Federal Reserve Bank of San Francisco John Williams who was recently in town telling the Australian Financial Review (AFR) that Australia’s property boom and the associatted rise in house prices means the housing sector is actually “flashing red”.
Williams warned that the absence of a recession in Australia since 1991, along with the apparent lack of governmental prudential oversight in the sector has created a culture of complacency over risk that he says could be dangerous.
"If people think there's no risk, they'll take a lot of risk," he told the AFR.
In comparison, the federal treasurer Scott Morrison on the other hand seems determined to be a ‘glass half full’ guy when it comes to the housing sector.
Speaking to The Australian yesterday, the treasurer embraced the heated up housing sector, saying that the industry has “swung back in favour” of owner occupiers and is “not headed for a crash.”
Later that evening, he was interviewed on the ABC’s 7.30 Report, sounding ever the pragmatist in relation to the housing ‘bubble’ as some have called it.
“…while the market has been running hot in Sydney and Melbourne, that isn't the case in Perth, Adelaide and Brisbane and Darwin, in particular. You have to get a balanced response that doesn't cause more problems somewhere else, than the problem you are trying to fix on the east coast,” he said.
Asked as to whether he would be tinkering with tax levers like negative gearing to increase the number of owner-occupiers in the market, the treasurer was forced to flash his economic rationalist credentials.
“No, that would be taking a sledgehammer to the property market, you wouldn't have a safe landing, which is what we’re moving towards, you’d have a crash landing, or a hard landing. That would have flow-on effects into the economy more broadly,” he said.
All this after Macrobusiness heralded the ‘death of Australian housing affordability’, quoting a recent report that showed the Sydney’s median house price to income ratio has reached 13.7-fold.
This was underlined by an ABS report that showed building approvals falling by 5.6 percent between April and May with high density apartment approvals down by a massive 12.1 percent over the same period.
Speaking to the ABC, NAB economist Tapas Strickland claimed that approvals were at a 12-month low, and that “…the housing construction cycle has topped out.”
Perhaps comparing economic predictions to sports results was a bit rash - maybe the more apt comparison would be to weather forecasts - at least then the fluctuations can then be explained with an almost-endless round of input variables.