CommSec Senior Economist Savanth Sebastian takes a look at the outlook for economic growth, employment and interest rates for the year ahead.
I THINK Donald Trump will be President of the United States at the end of the year, and I’m 95 per cent sure of it.
Making predictions about the future is good, and more people should do it.
Here’s why I predict Trump will hang on: history tells us no US President has abdicated, been impeached, or convicted in the first year on the job. Two died during their first year, but not in the last century. Medicine has improved, and so has the defence against assassination. But you couldn’t give Mr Trump a 100 per cent certainty of doing things the standard way.
He is the oldest US President, one of the most unusual, and one of the least popular. Furthermore, the world has only seen 44 other presidents. When your sample is so small, you need to keep an open mind. 95 per cent chance of lasting at least a year seems a reasonable chance
Making predictions keeps you honest. Everybody has that one mate who says, “I knew that would happen!” after something happens, but was curiously silent beforehand. If everyone made their predictions public that menace would be eradicated.
I’ve made a lot of predictions in my life and got plenty of them wrong. For example, I lost about $50 last year predicting what teams would make the AFL finals. This year, in this piece, I’m putting something bigger than $50 on the line — my credibility. (Hey, shoosh! It’s worth more than $50 to me, OK?)
Here’s another prediction. Malcolm Turnbull will be Prime Minister at the end of the year. This one I give only 80 per cent probability. We’ve seen plenty of Australian Prime Ministers rolled recently. There is easily a one in five chance that Prime Minister Turnbull goes into a spill and comes out as Mr Turnbull.
I also predict this: a 60 per cent chance petrol goes above $1.50 a litre this year. (the average national retail price is $1.31 at time of writing.) The oil price cartel, OPEC, is working to control oil prices, and that means oil prices should go up. Meanwhile, our dollar could fall if inflation keeps coming in low. The combination would make oil particularly expensive and cause pain at the pump.
Making predictions as a percentage chance is different to betting on one outcome or another. It’s more honest because it forces you to admit both sides are possible from here, but analyse why one is more likely than the other. I don’t get to say afterwards, “I said that would happen.” Because I admitted there was a chance it wouldn’t.
But it is not a cop out either. I can still be proven wrong. The way to judge these sorts of predictions is as a group. For example if we look back at predictions that have a 50 per cent chance, I should get about half of them right. If all of them come true, I made a forecast error — not being confident enough. For predictions with a 90 per cent rating. I should get about nine out of ten of those right, etc. (This approach is shamelessly stolen.)
To find out if I’m decent at making predictions, I need to make a lot of them. So here are some of my predictions for politics. I’m pretty confident the only place where we will see big change is WA, where a terrible economy is likely to cause a change of government.
Turnbull is still PM at end of year — 80%
Shorten Opposition leader at end of year — 95%
WA gets a Labor government — 60%
NSW gets yet another new premier — 20%
Australia’s economic growth over 3 per cent — 60%
Federal Budget deficit forecast for 2017/18 — 95%
Impeachment proceedings begin against Trump — 50%
Impeachment succeeds by end of 2017 — 0%
Trump is President at end of year — 95%
Hillary Clinton jailed — 0%
Steve Bannon still Trump’s chief adviser — 80%
Trump popularity below 50% at end of year — 70%
CURRENCY AND MARKETS
I’m predicting a small fall in the Aussie dollar by the end of the year and a minor lift in the stock market by the end of the year.
I think the RBA’s official interest rate will go nowhere fast as we see apartment completions increase and apartment prices stumble. Sydney and Canberra are likely to be the only markets with strong price growth in houses.
$A peaks between $US0.75 and $US0.80 — 80%
$A low between $US0.65 and $US0.70 — 80%
$A on 31 December between US$0.70 and US$0.75 — 60%
ASX200 goes over 6000 during 2017 — 40%
ASX200 dips below 5000 during the year — 40%
ASX 200 on 31 December 5700 to 5900 — 10%
Oil price goes over $60 a barrel — 80%
Petrol prices go over $1.50 / Litre — 60%
RBA’s Official interest rate at end of year is still 1.5% — 40%
National apartment price change -3% to +1% — 60%
National house price change +5% to +9% — 60%
Sydney dwelling price change +6% to +10% — 40%
Melbourne dwelling price change +0% to +4% — 40%
Brisbane dwelling price change -2% to +2% — 40%
Adelaide dwelling price change +0% to 4% — 40%
Perth dwelling price change -4% to +0% — 40%
Hobart dwelling price change +2% to +6% — 40%
Darwin dwelling price change -2% to +2% — 40%
Canberra dwelling price change +4% to +8% — 40%
As this next batch of predictions shows, I expect a small but real chance of a messy year, geopolitically. (Thanks Donald)
US deploys troops somewhere — 35%
Australia commits troops to war alongside the USA — 5%
Russia expands its territory — 25%
Big terrorist attack in USA (20 killed) — 10%
Big terrorist attack in Europe (20 killed) — 50%
Big terrorist attack in middle east (20 killed) — 90%
Non-political mass shooting in USA (20 killed) — 30%
Shots fired in South China Sea — 5%
North Korea regime intact at end of year — 95%
Nuclear weapons used — 1%
City of Mosul captured from ISIS — 30%
FILM, TECHNOLOGY, SPORT, ETC
I’m predicting La La Land has the best chance to win an Oscar, although I admit it’s a wide open race so I only have 35 per cent probability on it. (No other film gets more than 35 per cent, so it’s the favourite even though it’s not above 50 per cent.)
Meanwhile I’m confident Telsa has bitten off more than it can chew, global warming is coming to get us, and that picking the football premiers in February is for mugs.
Academy award for best film: La La Land — 35%
Tesla’s autopilot has another controversial crash — 60%
Tesla stock prices ends the year below $200 — 60%
Amazon launches in Australia — 70%
New record hottest year — 40%
Western bulldogs repeat AFL premiership — 20%
Cronulla Sharks repeat NRL premiership — 10%
Roger Federer wins no more grand slams this year — 90%
Ultimately, the reason to make predictions like this is a learning process. Making public predictions in 2017 hopefully forces a person to think about their beliefs, realise when and where they were wrong, and then change for the better.
Reckon these predictions are terrible? Reckon you can do better? Put your predictions in a comment below!
Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine. Follow Jason on Twitter @Jasemurphy