Economists with their forecasting can be like warring kids fighting over toys and lollies. In fact, when I was a young academic, the occasional lunchtime presentation of a colleague’s paper on the economy often led to

arguments of such a volatile nature that these presentations were terminated! As a younger man I found these encounters enthralling, seeing famous economists going for each other’s throats. And these memories came back to me as I considered Reserve Bank Governor Michele Bullock’s revelations at her press conference yesterday.

No one-s going to admit this but in the privacy of their own thoughts and offices there has to be a different point of view on forecasting of the Oz economy and I’m hoping the Governor’s rivals are more ‘on the money’ than her!’

Now I could be wrong but given what I’ve seen from my economist buddies over three decades, they like to be right on forecasting and don’t like being challenged on their analysis and arithmetic. So, I reckon the number crunchers at the RBA would be at odds with the Treasury team briefing Treasurer Chalmers. And this lot would be happy that Luci Ellis (a former colleague of Ms Bullock), now a chief economist at Westpac, is more aligned with Treasury’s view on where the economy is going, which contrasts with the RBA.

The Governor captured this view with the following yesterday: “The market path at the moment is pricing in interest rate reductions by the end of this year. I think the board’s feeling is that the near term – by the end of the year and the next six months – given what the board knows at the moment and given what their forecasts are, that that doesn’t align with their thinking about interest rate reductions.”

In normal people’s language, it’s “forget about a Cup Day cut and you can KO a December one as well!”

If you doubt my assessment, well, cop this from Ms Bullock: “The judgment of the board was that keeping the interest rate where it is and making sure that people understand that a rate cut is not on the agenda in the near term, given what we know that continued pressure will help to keep demand coming back into line with supply.”

This ‘forget the rate cut’ message is at odds with what Ellis (a former Assistant Governor of the RBA who at one stage had to be a rival for the top job that Ms Bullock got) said last week when the CPI came in lower than expected.

This is what Ellis told us: “The latest data show that inflation is indeed declining back to the RBA’s 2–3% target range at roughly the pace the RBA wants to achieve. That means rate cuts are on the cards – not immediately, but later this year.”

This revelation would have made Treasurer Jim Chalmers give out a “you little beauty!” because his Treasury team told him before the Budget that they expected the economy will be slow enough by year’s end to mean a rate cut would be on the cards.

But now the RBA boss is saying “forget it”, in my words not hers, and she’s sticking it to the Treasurer and the Albanese Government for spending and giving tax cuts that make killing inflation harder than it should be.

And this economic stoush is bound to get more intense, given this in The Australian today: “Reserve Bank governor Michele Bullock reveals ‘very serious consideration was given to a hike on Tuesday, with the central bank acknowledging government spending was keeping inflation higher for longer.

The Governor’s statement and press conference suggest the RBA is ‘hawkish’ as opposed to ‘dovish’, which is eco-language for it’s more inclined to hike rather than cut rates!

Fortunately, the RBA doesn’t have a great record for forecasting. Do I need to remind you of Dr Phil Lowe’s 2024 call on rates that the RBA board went along with for the ride?

Right now, the RBA thinks expected inflation, now at 3.8%, will be in the 2%-3% target range by the end of next year. I guess Ellis and Treasury would say it could come earlier and will justify rate cuts earlier than the RBA is currently guessing.

In a nod to the reality of forecasting, the Governor did admit that the outlook for the economy was “highly uncertain”, so we have to watch the economic data drops over the next three months to see if the Bullock Board knows more than the Westpac economic head honcho and boffins in Treasury.

I know who the PM and the Treasurer are rooting for, if only for re-election reasons and it’s possible that the differences of opinion on where the economy’s going and when rate cuts are needed, could get heated, though I hope they don’t get as rough as those lunchtime academic blow ups at the University of New South Wales!