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Future Shockers

“Prediction is very difficult, particularly about the future.” Journalists would do well to keep in mind that aphorism from influential Danish physicist Nils Bohr when quoting “experts” about the outlook for financial markets, the economy and politics.

That’s a tough adjustment for journalists who are keenly aware that today’s news is already well absorbed by the masses by the time newspapers go to print. Against that background of disintermediation, they become more reliant on printing eyeball-grabbing forecasts to build audiences to flog to advertisers.

And that did seem a pretty good defensive strategy a few years back when the internet started eating the MSM’s lunch. After all, if everyone already knows what happened today, you can bedazzle the punters with the awful prospect of what might happen next. But it doesn’t work so well now that  the source information is available in real-time to everyone. And it becomes rather embarrassing for the soothsayers when their previous forecasts are left like dog turds sitting on the giant lawn that is the global internet.

So how did we get here? A couple of decades ago, legions of consultancies, think tanks and investment banks (the BIS Shrapnels and Access Economics) worked out that the media is basically lazy and will run a dire forecast without a second thought. It was a win-win. The consultancy got to brand itself by flogging economic “outlooks” and long-term “trend analysis”; the desperately witless journalists got cheap, prefabricated and authoritative sounding content to fill the gaps between the ads paying their salaries.

Of course, the trick with making forecasts is to ensure the forecast horizon is sufficiently far away (and sufficiently conditional) that no-one will ever remember to check whether you were right or wrong. Indeed, long-range forecasters survive by counting on the short-term memories of the people who report on them.

So it was that we saw the ABC and others this week blandly recycled Access Economics’  latest prediction that the mining boom will be over in two years.  Of course, that might well turn out to be true, but it would help if the media pointed out that Access has been issuing essentially the same forecast for the past, oh, eight years:

  • May 7, 2003, The Australian Financial Review:
‘The investment boom in the resources industry may be coming to an end, according to respected forecaster Access Economics.
The Canberra-based group said the rising Australian dollar and sluggish global economic conditions were hurting the mining sector which has invested heavily in new projects in recent years.
“The picture 12 months ago looked very strong, like there may be a protracted mining and resources boom, but we’d have to say that now it looks like it might run out of puff,” Access Economics economist David Rumbens said.’
  •   Sept 29, 2004, The Australian:
‘This is as good as it gets — the Australian economy is likely to grow much more slowly over the next financial year than it is growing at present, according to Access Economics.
The firm’s latest review of the economy says the election spending will keep consumer spending strong past Christmas and well into 2005.
“But we risk a retail reckoning,” the firm says. Lower house prices and the prospect of rising interest rates next year are making consumers nervous.

It is also possible that commodity prices will start falling, with lower world economic growth and many mining investments coming on stream over the next two years.’

  •  Jan 24, 2005, The Age:
‘Australia’s trade woes will continue to plague the economy for years as a flood of mining investment around the world pushes commodity prices down, a leading forecaster has warned.
Access Economics is predicting that the current account deficit – now at the highest level since Paul Keating issued his “banana republic” warning – will continue to disappoint, despite the strongest global growth for three decades.
Treasury and others have for some time been hopeful that Australia’s pathetic trade run will end as much-needed mining investment begins to yield returns, lifting the volume of commodity exports.
But the problem is that other countries such as Canada have also been heavily investing in mining to capitalise on the resources boom. That means lower prices, offsetting the gains from the higher volumes.’
  • May 2, 2006, The Australian:

‘Commodity prices are likely to peak this year and are primed for a fall of up to 50 per cent, analysts warned yesterday as resource stocks again jumped sharply higher.

The gold price hit a 25-year high at $US661.10 an ounce, sparking fresh buying of mining stocks, despite a warning from Canberra-based Access Economics that metal prices are poised to start dropping steeply from the end of the year.

This year will be as good as it gets in metal markets, according to Access’s latest quarterly survey of 10 forecasters.
Access said it was slightly more pessimistic on the outlook for prices than the forecasters, noting that despite strong demand from China and in the future India, new mine supply is set to catch up with the market.’

Now far be it from me to claim any superior knowledge about the economic outlook than the expert forecasters at Access, but how hard can it be for journalists to do the research that just took this former hack 10 minutes to find? What are journalists bringing to the table if they are only cutting and pasting from the press releases that are freely available on the web anyway?

What is to stop a journalists from going straight to the RBA’s website, calling up the most recent statement on monetary policy and finding this statistic: ‘The value of Australian resource exports rose by 16 per cent over 2011, contributing 2 percentage points of the 5½ per cent growth in nominal GDP over the year to December. Over the year to the September quarter 2011, export prices for iron ore and coal were supported by growth in global steel production and supply disruptions in Australia and elsewhere. This took the terms of trade to their highest level on record.’

And what is to stop a journalist from going straight to the Australian Bureau of Statistics’ website and the latest private capex survey to discover this: ‘Australia is currently experiencing unprecedented levels of investment activity. This is primarily due to the number and size of mining projects currently underway. Investment activity is expected to continue to rise in the coming years as additional mining projects commence.’

So Access got it wrong. And it got it wrong again. And again. And again. But did you hear any of that in today’s news coverage? Did you hear any journalist provide any other source of information, or insert context or ask the forecaster to explain why it should be believed this time when it has got it wrong so often in the past? Crickets….

You see this is the problem. The media is at risk of becoming a gigantic reproduction machine. If journalists are just going to swallow whole everything they are told, what value do they bring? “But it’s just our job to report,” you’ll hear. No, their job is to explain, verify, check, challenge. The source information is all out there. It’s not that hard to put it together yourself. Yet day after day, we hear breathless headlines from under-trained, over-worked hacks who spend no time checking, no time researching and no time asking anyone questions that might yield something other than what is already contained in a self-serving press release.

Is it any wonder the public is giving up on the mainstream media?

35 thoughts on “Future Shockers

  1. A few weeks ago a well known commentator on financial affairs stated, on his regular nightly News round-up, that [from memory] 'the all ordinaries index in every market increased for no apparent reason”.

    I could have provided that level of analysis.
    For free [well cheap any way].

    fred

  2. Economists are up there with meteorologists in the group of professions which really should not be trusted to prognosticate accurately long-term. In the case of meteorologists, I'll trust them to state the weather for the present day, and maybe about two to three days ahead. Outside that range, the accuracy gets really screwed up, really fast. But at least they have the science to back them up these days.

    With economists, well, if one of them told me it was raining, I'd still be checking the view out the window.

    Oh, and it appears that these predictions of the end of the world in the form of the minerals boom busting occur on approximately a 16 month cycle. Next one due around November 2013 – keep your eye out for it!

  3. Denmore. Access has NOT forecast an end to the mining boom as the SMH headline misleadingly said, merely an end to the mining investment boom.

    (I am a little surprised that you as a former journo was sucked in by a headline. Never mind.)

    Access is not alone in near-consistently forecasting an imminent downturn in Australia's terms of trade.

    Get an eyeful of the Treasury and Reserve Bank forecasts.

    I am not criticising anyone here. Such forecasts were and are eminently reasonable. That is all.

  4. Peter Martin, the SMH wasn't alone in reporting it as Access predicting the end of the mining boom. So did News Ltd, AAP and NineMSN and the ABC. In any case, if you read what I actually wrote, Access forecast the end of the mining INVESTMENT boom (if you insist) back in 2003. My point is that forecasts from people like Access are reported in the media as carrying far more weight than they actually have. And there's an onus on journalists to point out to the public that most forecasts are merely assumptions. And that most turn out to be WRONG.

  5. Peter Martin, the SMH wasn't alone in reporting it as Access predicting the end of the mining boom. So did News Ltd, AAP and NineMSN and the ABC. In any case, if you read what I actually wrote, Access forecast the end of the mining INVESTMENT boom (if you insist) back in 2003. My point is that forecasts from people like Access are reported in the media as carrying far more weight than they actually have. And there's an onus on journalists to point out to the public that most forecasts are merely assumptions. And that most turn out to be WRONG.

  6. “Did you hear any journalist provide any other source of information, or insert context or ask the forecaster to explain why it should be believed this time when it has got it wrong so often in the past? Crickets….”

    You are wrong.

    Published at midnight. Has plenty of “explain, verify, check, challenge”.

  7. Anonymous, that piece was published at least 12 HOURS after my series of tweets on the crappiness of Access' forecasts. My point remains. Journalists need to be careful about going straight to air or print or online with 'analysis' of economic forecasts without doing their spadework first.

    Look at the real-time coverage of the Access report on the ABC, AAP, Ninemsn, and News Ltd and you'll see they ALL reported it totally non-critically.

  8. Peter Martin, you are one of the worst culprits and, given your claim to be an economist, the most culpible.

    Your readers had every right to know that Access have continued to failed in their forecasts. Instead you were more focussed on establishing their credibility (respectability, set up to serve both political parties).

    Delloite Access can engage in appalling knavery (like their abominable work for state lib governments demonstrating hideous job lossess from a carbon tax) and retain the credibility because of people like you

    And what the hell were you trying to achieve in this tortured non-sequiter of a paragraph?:

    “Access stresses its forecast does not present an immediate threat to Australia’s economic outlook but it comes after Labor’s narrow weekend byelection win in Melbourne in a state poll the Coalition did not contest, further complicating the task next year’s preelection budget.”

    What on earth?

  9. Yes (this will be from a different Anonymous) Peter Martin is the one of the more odious economic writers going round and a pin-up boy of one of the most insidious journo archetypes: mediocre careerists completely ignorant in the socratic sense

    His shifty pedantic response to criticism is, I'm sure in his mediocre mind, actually genuine countering of that criticism. Ultimately though

  10. Tim Colbatch and Peter Martin. That is the Age's piss take of an economic team

    May it die a fast death. The vacuum at least offers us a hope of new beginnings

  11. Who is Peter Ker BTW?

    I like this a lot “Auditing agency Deloitte”

    That is how these insidious accounting firms would be introduced by jounalists actually persuing the public interest rather than their own. Instead we get teh inept Peter Martin's hagiography

  12. Agreed, David. Peter Martin is a decent journalist, with his heart in the right place. There are certainly much worse than him around.

  13. Agreed, David. Peter Martin is a decent journalist, with his heart in the right place. There are certainly much worse than him around.

  14. I agree, Peter's contributions are usually valuable additions. But when criticised (soundly), he tends to hide behind obfuscation rather than accept points.

  15. I agree, Peter's contributions are usually valuable additions. But when criticised (soundly), he tends to hide behind obfuscation rather than accept points.

  16. Economic journalists go wrong when they think too much like economists; it usually means they start writing like economists. Same as police reporters; spend too long on the beat and you find yourself writing that “the alleged assailant decamped in a northerly direction”. Same with the economic journos – when they start getting excited about the compositional issues in average weekly ordinary time earnings, they probably need to do something else. And when political journos start thinking and writing like political tacticians and strategists, same thing applies. Actually, there's a blog postin this….

  17. Yeah I too would leap in in defence of Peter Martin and particularly Tim Colebatch. Though Martin does seem to get some idées fixes, such as the NBN being a terribly bad thing and beaten by wireless.

  18. “What are journalists bringing to the table if they are only cutting and pasting from the press releases …”
    Well in the case of Joe Hockey's predictions of movement in interest rates (the night before the Reserve Bank meets), I would say they deliver a comedy segment right up there with Clark and Doyle.

  19. That'd be because he dosn't understand the technology, wilful. He's not alone there, although I'd expect an economist to have enough mathematics to understand why wireless hasn't got the bandwidth of optic fibre by several orders of magnitude.

  20. Halle-freakin'-lujah!

    Finally someone is calling out these self proclaimed oracles. If they were writing racing tips they would have been laughed off the track years ago.

    That incredibly conflicted clown Kohler needs to be sent off to find a real job as well, hopefully casual and low paid like he seems to think is a good thing in the name of 'flexibility'. Sadly parasites like Kohler, Richardson et al keep popping up like weeds in the garden and the ABC, Fairfax and News keep insisting they're orchids.

    The tragedy of these hucksters is that they are the instrument whereby the corporate sector roams through household savings and pockets anything shiny. Witness the urgings to “mum and dad” investors to sink their hard earned into whatever scam the unproductive financial industry is pushing this week.

    Then there's how much this pap contributes to the backstory that the country is run by two headed lizards calling themselves the Gillard Government. They peddle this bearish sentiment as if it's a greater threat than, gee, I dunno, undermining household incomes that are generally based on hourly wages by 'liberalising' the labour market with 'reform'.

    As someone who has lived through about as much reform as a man can stand and still live I say they should be run out of town on a rail (after being beaten with a goodly lengthy of chain).

    I think it was John Clarke, as Fred Dagg, who said that when the news starts featuring economists before the sport then bury everything of value in a deep hole in the backyard.

  21. What's to stop the journalists doing the things you suggest? Subject literacy. Most journalists know two-fifths of bugger-all and have memory spans shorter than a goldfish's.

    I'm pretty sure some of them outdid themselves when mastering Copy-and-Paste.

  22. Peter Martin is not only seen as a very controversial figure, but also the sphere he works and reports about is related to so many fluctuations lately, that we all have been witnesses to. But the main rules every journalists, who is entrusted with making important and reliable for the given audience info should be really reduced to: explain, verify and check!

  23. Peter Martin is not only seen as a very controversial figure, but also the sphere he works and reports about is related to so many fluctuations lately, that we all have been witnesses to. But the main rules every journalists, who is entrusted with making important and reliable for the given audience info should be really reduced to: explain, verify and check!

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