Economist’s job is never done
February 28th, 2015
Economists are information filters and processors, distilling vast amounts of swirling, opaque market prices, industrial production reports, trade data and myriad other economic statistics to determine where and how fast money is flowing in the economy.
Based on this they make forecasts on interest rates or the cost of money, one of the few things most people care about when it comes to economics.
But in this increasingly financialised, media and marketing-centric world, conveying these views to clients and the public is important.
“Talking to clients is the major focus of what we do and, of course, we have to do research to be able to know what’s going on and write material,” Perth born HSBC chief economist for Australia and New Zealand Paul Bloxham told WestBusiness.
“There’s also a role as being a public face for the bank and giving HSBC’s view on the global economy and locally.”
The Sydney-based economist is one of the faces regularly seen on television at Reserve Bank interest rate decision time and at other economic events.
“Being the chief economist of a global bank is hectic,” he said during a quick WA visit to give his forecasts on the commodity outlook at the RIU Explorers Conference in Fremantle.
He was in Melbourne the day before and will be in Asia next week, meeting the bank’s clients, telling them how its economists and strategists see world growth unfolding over the next year or two. Sometimes he gets a new and different perspective from clients, too.
Between all this, Bloxham needs to find time for research so he can sit down and make the big economic calls.
Although HSBC global research reports are important, he says he is free to discount their commodity and offshore growth forecasts as he sees fit when inputting the critical economic factors into his forecasting model.
“I can apply judgment to what is being said, there are always lots of uncertainties around forecasts,” he said.
“All of my colleagues would freely admit they have a central forecast and a set of risk factors around that, so you certainly take some of that into account.”
But economic forecasting is not just about interest rate movements and unemployment growth. Having a broad perspective is just as important.
“Economics can’t stand alone,” Bloxham said. “If you want to understand it you have to have a good understanding of history and a long view. There’s no point just looking at the last few months or years. Data sets just generally do that. It takes a broader, macro perspective.”
Forecasting isn’t easy, and even with this holistic view Bloxham is part of the broad consensus in Australia that was too optimistic in the mining growth transition and missed the fall in interest rates for the past three years.
He maintains monetary policy is working by stimulating asset prices and house construction but a lack of business and consumer confidence amid broad fiscal uncertainty was the key factor behind tepid growth.
In the short term things could get bumpy but he is optimistic over the medium term.