The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."
Tuesday, October 2, 2012
RBA cuts on its forecasts. But what does Glenn Stevens say about forecasts?
Glenn Stevens (August 2012): As I said earlier, forecasting is an extremely imprecise art. There is not a great deal of science in it. It has ever been thus...Some of the difficulty is—and I probably will not get this comprehensively complete off the top of my head—the future is inherently difficult to predict anyway. The recent past has actually been difficult to predict—that is, the data that we have for what has been happening. Inevitably, even the best data is measured with a margin of error. It gets revised, and so the jumping-off point into the future that you think you have today actually you find is a little bit somewhere else subsequently. That would be true to say partly why the very near-term growth forecasts are a bit higher. That would be right, I think Chris, that the recent history got revised up a bit from what we had been told earlier. That is a difficulty. We know that the future will have shocks. A shock by definition is an unforecasted event. We spend time thinking about what they might be, but there will always be things that come along that you could not predict and, even if you could predict they might occur, not when. It is often hard to have a good sense of how they work...So those things—acute uncertainty: the forecasters always want to say there is more than the usual degree of additional uncertainty; that is sort of a forecasting cliche. But it probably is true at times like this. That is what I would say. Chris, do you want to add anything?
Dr Christopher Kent (August 2012): I would agree with you there. The shocks that are before us—we cannot ever know what they are. A critical part, though—and of late—has been knowing where we are coming from. The point is that it is just very hard to pin down the state of the economy in real time; it takes time for data to come through and be processed accurately and compiled together...
Glenn Stevens (November 2011): Experience over the inflation targeting era (since 1993) suggests that the probability of the CPI outcome being within half a percentage point of the central forecast [eg, between 2-3%] is roughly two in five at either a one year or a two year horizon.