Any business or finance editor will tell you that of all the news they publish, the most clicked-upon stories involve mentions of property, house prices and interest rates. No surprise, obviously, given how leveraged the average Australian consumer is to real estate (see RBA chart pack here).
So there clearly is an incentive on news sites to crank up speculation over interest rates, usually by incessantly featuring the rent-a-quote economists from financial markets. These people are paid to market the names of the banks for whom they work and spend their entire time previewing and analysing every partial economic indicator, purely in terms of what it means for the RBA’s official cash rate.
With the economists seeking publicity and the media wanting easy cut-and-paste business “coverage” that requires little work and keeps the punters clicking through to see the ads, you can see there are mutual interests at work in reporting the economy purely in terms of whether the central bank will raise interest rates by a quarter percentage point this month or next.
Sometimes – well, actually, pretty often – the economists give the media a bum steer to the point where the news about rates is written before the official announcement actually occurs. While that can be a little embarrassing for all concerned, the humiliation is lessened usually by the fact that both the media and the economists run in packs. When they get it wrong, they all get it wrong together and they can usually count on the punters having short memories and no-one noticing what a pointless exercise it all is.
From a commercial perspective, however, it doesn’t matter whether the rate rise happens one month or the the next. What’s important is the noise around interest rates and the opportunity to riff off this speculation into boilerplate stories about “struggling homebuyers” and wicked bankers. This is the “hamster wheel” in action, the tendency in the new and commercially pressured MSM to focus more on churn and quick hits (which can be generated almost at no cost and in high volume) than on the traditional deeper reporting. Or as the Columbia Journalism Review put it:
“Journalists will tell you that where once newsroom incentives rewarded more deeply reported stories, now incentives skew toward work that can be turned around quickly and generate a bump in Web traffic.”
Web traffic over interest rates doesn’t just come from the chatter around month-to-month RBA meetings. Newspapers also frequently turn to the “long-range” forecasters in the industry groups and consultancies, who – seemingly undeterred by the fact that market economists can’t pick rates one week ahead – blithely make forecasts about where rates will be three to five years ahead.
BIS Shrapnel’s Frank Gelber – “a leading interest rate forecaster” we’re told – recently shared with the Herald Sun his prophecy of the cash rate rising to 7.5 percent by 2013 (or three percentage points above current levels). This is the same Frank Gelber who in March 1995 told The Age that 90-day bank bills would hit 12.5 percent by June 1996. This turned out to be five percentage points too high, a bit of a miss in forecasting land. And the same prophet who told us in 2003 that mortgage rates would hit 10.5 percent in mid-2006. That again was about three percentage points overcooked.
Once again, though, it doesn’t really matter whether the long-term forecasts are right or wrong – because by the time three years have gone by everyone will have forgotten what the gurus forecast back then and will be worrying about the next train heading their way. And for the newspapers, there is always going to be another scare guaranteed to get Mr and Mrs Dandenong or Mr and Mrs Penrith reaching for the razor blades, but also conveniently generating bit of web traffic for your MSM publisher in the process.
In the meantime, while pointless conjecture about future levels of interest rates dominate the business sections of our newspapers – real policy issues go under-reported – like why we have a tax system that rewards property speculation and why governments don’t level with people that first home buyer subsidies are immediately capitalised into prices and whether our infatuation with real estate is a giant ponzi scheme that poses the biggest single threat to our long-term prosperity.
It’s simply easier to bang on about our relatively insignificant public debt of around 8 percent of GDP (compared to a household debt servicing burden of 150 percent of disposable income) and portray the dice-rolling guesses of economists employed by bond-holding banks and publicity seeking consultants throwing darts as the wisdom of Solomon.
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