Predictions of the outcome of the 2019 federal election were inaccurate. Both polls of voting intentions and betting markets failed to predict a Coalition victory.
I have explored whether the Wisdom of the Masses, the general public’s expectations about the future on several issues, can explain the election outcomes between 2007 and 2019. Elections are intrinsically about the future.
My findings are positive and this provides a new basis for predicting Australian federal election outcomes.
Expectations about three issues have explained the outcomes of the past five elections: belief in imminent climate change; fear of terrorism; and economic pessimism. Expectations about each of these three issues have varied considerably over this period. The findings provide insights relevant to the focus of election strategies of political parties.
My report is available at foreseechange.com.au.
Government and business planners need accurate economic forecasts to make optimal decisions. Investors too need accurate economic forecasts as part of evaluating future company profits.
There are times when economic forecasts are quite accurate: this is usually when there is little variation from recent trends. There are also times when accuracy is very poor.
It would be valuable to be able to predict when economic forecasts can be relied upon and when they are likely to be inaccurate. This is important for risk management and appears to be possible, at least in Australia. There are circumstances when official forecasts are likely to be most inaccurate.
I have identified the conditions under which GDP forecasting inaccuracy is greatest. My report is available at foreseechange.com.au.
Most will not be spent initially, only 25% to 30%. This is based on modelling past data and tracking surveys, conducted since 2003 by foreseechange, of how consumers allocate discretionary funds.
More will be used for debt repayment. When consumers repay debt, some may become more willing to spend subsequently. But very low income growth in Australia will limit the ability to spend.
Even more will be used for saving. Much of this is precautionary or for other long-term saving, such as retirement. Quite a lot will be saved by young adults towards the purchase of residential property.
One of the main purposes for saving is for a holiday, mostly overseas. Tax cuts put towards saving for a holiday will eventually be spent, but much of it will be spent overseas.
The overall impact on consumer spending may be just noticeable and may hold the economy up a little for the next 6 to 12 months. Beyond then, we will be back to weak consumer spending growth and a weak economy unless we have policies to significantly boost productivity.
The glass may appear to be more than half-full for a short time, but the content will soon be consumed.
Details are available at foreseechange.com.au.
They were horribly wrong on the 2019 Australian federal election outcome. Now I have come across an article from my files concerning Sportsbet’s odds on Australian interest rates in 2018. This was not a good guide!
In the Australian Financial Review of 22 September 2017, Philip Baker noted that Sportsbet had two interest rate increases in 2018 as the $2.80 favourite, while just one increase was priced at $2.88. No change was paying $3.60. In fact, interest rates did not change in 2018 and the Reserve Bank cut interest rates in June 2019.
It is thought that betting markets are accurate because people with inside knowledge gamble and win from the great unwashed who also gamble. But insiders are not always right!
More in my book “Forecasting: the essential skills”
Australia has joined other countries with polls and betting markets proving very inaccurate in forecasting the 2019 federal election outcome.
My article suggests that studying polling trends would have been accurate.
How Labor lost
In my August 2018 post, I noted a suite of indicators that Australia’s economy was slowing significantly. It is only in May 2019 that official forecasts have been revised downwards to reflect he long-evident facts.
The Reserve Bank of Australia have announced their downwards revision on the eve of Australia’s federal election on 18 May 2019.
Those who read my August 2018 post will have had plenty of time to prepare for this slowdown.
My latest report on Australia’s economic outlook is sobering, but essential, reading.
In November 2018, our wisdom of the masses tracking survey indicated an increase in the likelihood of a severe economic slowdown. At that time the Reserve Bank of Australia was predicting 3.5% growth in 2019 and the federal government was nearly as optimistic. The Reserve Bank lowered their forecast to 3% only in February 2019.
As of 6 March 2019, we know that the economy slowed significantly in the December 2018 quarter to be only 2.3% higher than a year earlier. There is little comfort across a range of indicators that there will be any improvement in the March 2019 quarter.
On a quarter-to-quarter seasonally adjusted basis, Australia is now in a per capita economic recession for the first time since 2006.
Consumers are at the beating heart of the economy – both on the demand and supply sides. If we want to know what is going on, we should track their views. In aggregate, they will be more accurate than the experts!
See my wisdom of the masses expectations for 2019 for more information.
Peak car or perfect storm?
Since 1998 (when I was working at Nielsen) I have been forecasting new vehicle sales with a high degree of accuracy. In 1998, I predicted sales of 770,000 to 820,000 when the industry was forecasting 720,000. The outcome was 808,000. This was reported in BRW on 26 January 1998.
Our models have been continuously improved but there are occasional surprises. 2018 was such a year.
I have now analysed sales and the causal factors for 2018 and identified a pair of factors which have had a larger negative impact than in the past.
Several other factors were influential to a lesser degree, but it was a perfect storm. One factor may have a greater impact in 2019.
My report is available at foreseechange.com.au.
The Coalition is very likely to lose the 2019 federal election, which will probably be held in May. Three separate predictive methods all show a Labor win. Is this a repeat of 2007 when Labor won despite a strong economy? Will climate change be the deciding factor?
It is not a repeat of 2007 because the economy now is much weaker than then. But climate change does seem poised to be a very influential factor because the level of voter belief in climate change has now recovered to the same level as in 2007, across all age groups.
A detailed analysis is contained in my report, along with an assessment of the top 10 issues that will be in the minds of voters.
Australia has been lagging in infrastructure construction since I arrived in the late 1950’s. We have been playing catch-up for all that time, but we have fallen even further behind since 2007.
In addition to the transport infrastructure backlog, particularly public transport, we now need to significantly increase investment in health in order to avoid a big increase in the prevalence of several diseases.
Australia’s population growth rate has increased substantially since 2007. Net migration increased and so did births.
The peak age of net migration is 20 to 24 and so there is now a large increase in the number of people aged 30 to 34. This coincides with an increase in the Australian-born population with ages centred around 30, due to an increase in the number of births in the late 1980’s.
There is a large peak in the population aged 25 to 34 and as they age over the next 10 to 20 years, they will be of an age where the onset of several diseases increases. This includes type 2 diabetes, prostate cancer, breast cancer, and multiple sclerosis.
At the same time, the oldest of the large baby boomer generation will reaching the age where the prevalence of cardiovascular disease, Alzheimer disease, and several others increase.
Accordingly, Australia needs to invest significantly more in disease prevention as well as cure and treatment.
For details, see my report.