Before we start, I will not take any responsibility for any investment decision made on this post, if you are an investor, you will have to rethink how you make your investment decisions if you base your decisions on a blog post.
Since a lot of people have the impression that economists’ prediction are only as good as throwing a dart to a dartboard, I guess I’ll try to keep track of how well my economic prediction goes based on the economic theory I use, which is Post Keynesian theory.
My predictions are also based on certain assumptions:
1. US and the EU will not implement any significant stimulus program during the 2013 calendar year.
2. The Australian Government will continue with its self-destructive austerity and mindless pursuit for budget surplus regardless which party will be elected during this calendar year.
3. There will not be a significant depreciation of the Australian Dollar during the year (it will remain at above $1 USD).
Movements in the labour market:
The starting data is the January figures for the labour force.
· Participation rate dropped 0.1% from 65.1% to 65% in the period of December 2012 to January 2013; this is likely to fall further.
· Full time employment dropped 9,800 to 8,098,400 since December 2012; this is likely to remain constant or fall further slightly.
· Part time employment increased by 20,200 to 3,450,700 since December 2012; this is likely to increase due to the movement from full time position to part time, casual positions and new entrants of the labour market.
· Unemployment rate remained constant 5.4% from December 2012 to January 2013; however this is due to more people giving up looking for work (decrease of participation rate) and this figure is likely to increase by the end of this year.
· Aggregate monthly hours worked decreased by 3.9 million hours to 1,619.7 million hours. This is what you would expect if there is a movement from full time employment to part time employment, and/or loss of work hours in part time employment. The figure is likely to fall further during the year.
Movements in other economic indicators:
The starting data is the September 2012 national accounts as the December data is not yet available at the time of writing (hence September 2013 is the national account I will use for ending data):
· GDP growth from September 2011 to September 2012 is 3.1%; this is likely to be further weakened. Note this is below the required rate of growth for stabilisation of the labour market. For more comprehensive statistical analysis, visit this blog post by Bill Mitchell.
· Inflation rate from December 2011 to December 2012 is 2.2%; this is within the lower range of the 2% to 3% range of the RBA. This is likely to be the case for this calendar year.
· Interest rate was cut to 3% at the beginning of December 2012; there are several factors involved in decisions made by the RBA, which I will discuss in later posts. I expect the interest rate to be cut below 3% by the end of the year due to weak economic outlook (and the government is making it worse with austerity!), however it is unlikely the interest rate will be cut to below 2.5%.
Overall, the prediction for 2013 represents an economy that will grow at below the growth rate required for the labour market to stabilise. I will update this post when the September 2013 data comes out for GDP growth and December 2013 data for other indicators to see if I can beat a random dart.