Economist Warren Hogan is telling us that there’s no way the Reserve Bank will cut interest rates on Tuesday week. I hope and think he’s wrong, but I do have to recall what one of my favourite all-time economists John K. Galbraith once said: “In economics, the majority is always wrong.”

In fact, J.K. was wrong to use “always”. The word he should have used is “often” and that majority he refers to could even be the majority of economists as well!

Economists are great at looking back and explaining why what happened actually happened. However, when predicting the future, economists make weather forecasters look reliable!

By the way, the Reserve Bank of Australia is generally a good central bank compared to others around the world. However, their one big failing has been being “late to the party”, as ex-Treasurer and PM Paul Keating once noted.

Often, they’ve raised late and cut late and I’m hoping the RBA governor Michele Bullock and her board aren’t on a unity ticket with Warren.

Hogan, the chief economic adviser to Judo Bank, pretty well correctly predicted the last move up by the RBA when it raised the cash interest rate to 4.35% in November 2023. The majority didn’t see that move as early as him.

However, his other calls were that rates would go even higher. He has been wrong on that so far. Today he has written in the AFR, and this is the headline he runs with: There is no way the Reserve Bank can cut interest rates next week.

For those worried that Hogan is a guru on rates, let me give some objective history. He was chief economist at ANZ for a long time, but he didn’t lose his gig for being always right on rates. I respect his knowledge and often had him on my TV program called Switzer on the old Sky News Business channel. That said, I’d never put a lot of money betting he or any economist would be right on rates.

But let’s have a look at his arguments against a rate cut next week. Here goes:

1. Hogan says we’re not certain that the inflation ‘war’ is over.
2. He thinks forward momentum of the economy looks too positive for a cut.
3. The latest retail numbers weren’t bad enough.
4. He thinks inflation is higher than 2.4% and more like 3%.
5. Wage costs up 4.3% in the year to September are still too high.
6. Productivity is poor and that’s not good for cost and inflation reductions.
7. A rate cut would raise inflation and job creation and that’s not what we want right now.
8. The labour market isn’t weak enough and unemployment isn’t high enough to permit a rate cut now.

There’s a lot of truth in Hogan’s arguments but, like a lot of economists before him, he might be looking at the future world with old backward-looking glasses. The world has changed since Covid lockdowns.

People work from home like never before. Governments have been spending like there’s no tomorrow and future governments will be cutting spending big time. The public sector spending is masking a private sector slowdown, with economic growth at the lowest level in decades, if you ignore the Covid crash.

Australia's economy grew by 0.3% in the September quarter, and 0.8% over the year, according to the Australian Bureau of Statistics (ABS). And the RBA has tipped end-of-year growth at 1.5%, which looks like pie in the sky.

Also, artificial intelligence will kill jobs, at least in the short term, and that won’t be great for wage rises.

Hogan and other economists who make bold predictions should note what Galbraith intelligently observed with this: “I believe the greatest error in economics is in seeing the economy as a stable, immutable structure. In the usual (though certainly not in every) public decision on economic policy, the choice is between courses that are almost equally good or equally bad”.

The Aussie economy has changed enough for both Warren Hogan and yours truly to be less certain that we’re right about when we should cut rates, but I hope the RBA looks at the growth numbers and the new world according to President Trump and says: “Yep, it’s time for a cut.” HSBC’s chief economist Paul Bloxham looked at the Trump tariffs and backed a rate cut only last week!