Fool or forecaster: Which economists got their 2022 forecasts right – and which got ‘em wrong

The latest Fool Or Forecaster Report, an annual report released by property podcast The Elephant in the Room every April Fools’ Day, has revealed which economists got their 2022 forecasts spectacularly right – and which got them horribly wrong.

Analysis of numerous data around property prices, interest rates, and inflation revealed the following standout forecasters:

• Christopher Joye, of Coolabah Capital, predicted in October 2021 that the Reserve Bank would start tightening in mid-2022, and that this would lead to property price falls
• Warwick McKibbin, of Australian National University, and Adrian Blundell-Wignall, of Sydney University, predicted in January last year that RBA would start lifting the cash rate in the first half of 2022
• Stephen Koukoulas, of Market Economics, predicted in January last year that house prices would drop 5-7% nationally in 2022
• Mark Crosby, of Monash Business School, predicted in January last year that Sydney and Melbourne property prices would decline by 10% in 2022

The analysis also exposed some economists whose 2022 predictions turned out to be seriously flawed:

• Peter Tulip, of Centre for Independent Studies, predicted in January last year that inflation would be 2% in 2022 and that RBA would start lifting the cash rate in 2024
• Stephen Anthony, of the University of Canberra, predicted in January last year that inflation would be 2.4% in 2022 and that RBA would start lifting the cash rate in 2024
• Craig Emerson, of the Victoria University, predicted in January last year that inflation would be 2.75% in 2022 and that RBA would start lifting the cash rate in 2024
• Andrew Wilson, of My Housing Market, predicted in February last year that it was “absolutely nonsensical” RBA would lift the cash rate as early as August
• ANZ predicted in February last year that national house prices would climb by 8% in 2022
• Margaret McKenzie, of Federation University Australia, predicted in January last year that Sydney and Melbourne property prices would both see at least 10% rise in 2022
• Mala Raghavan, of the University of Tasmania, predicted in January last year that Sydney and Melbourne property prices would both increase by at least 10% in 2022
• Renee Fry-McKibbin, of Australian National University, predicted in January last year that Sydney and Melbourne property prices would both rise by at least 10% in 2022

The Fool Or Forecaster Report is hosted by buyer’s agent Veronica Morgan (pictured above left), of Good Deeds Property Buyers, and mortgage broker Chris Bates (pictured above right), of Wealthful.

Morgan said the report is designed to hold those who were brave or foolish enough to make public forecasts accountable for their predictions.

“Economists are smart people who are skilled at analysing data, so you’d assume their forecasts would be accurate most of the time,” she said. “But if you look back at their forecasts after the event, you’d be shocked to discover just how often they’re wrong. 

“However, the general public doesn’t realise this, because economists are rarely held to account for their forecasts. I suspect most economists don’t even realise how bad they are at making predictions, because they’re always so busy making new forecasts that they don’t have time to review the old ones.”

Bates said Reserve Bank of Australia governor Philip Lowe was the perfect example of a flawed forecaster.

“If there’s anyone who would’ve been expected to know when the Reserve Bank was going to start lifting rates, it would’ve been the governor, but his forecasts turned out to be wildly inaccurate,” he said.

“The RBA started increasing the cash rate in May 2022. But in October 2021, Dr Lowe said the conditions needed to start increasing the cash rate would probably ‘not be met before 2024.’ After the March 2022 monetary policy meeting, he said the board was ‘prepared to be patient’ about when it would start lifting the cash rate.

“Even as late as April, after pointing out that monetary policy tightening would start only once the board was sure inflation had sustainably increased, Dr Lowe said ‘important additional evidence’ about inflation would emerge ‘over coming months.’”

Bates clarified that the report was not a personal attack on Lowe or the other economists. Rather, it was to point out how difficult forecasting can be given the many variables at play.

“Perhaps we shouldn’t be surprised that even the smartest economists are so wrong so often,” he said. “After all, when sporting experts are asked to tip which football team is going to win, they regularly make the wrong choice – even though there are only two possible outcomes and relatively few variables to consider.”

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