Tuesday, September 8, 2009

Economists and fortune tellers

At this time the Labour Government is quietly congratulating itself on the "success" of the economic stimulus package it launched last year to pull Australia out of the economic crisis. As far as economic modeling is concerned, one must not get carried away. There is simply no straightforward answer to how the economy works. Economic theories abound whenever there is a significant upswing or downswing of the economy. Economists like to parade their theories, which often make sense at the time. In a way they are like fortune tellers. When they are proven wrong, they are easily forgotten, but when they make a correct prediction they are given a lot of fanfare.

Back to the Australian economy... it is possible that even without the stimulus package, things might have not changed much. Australia has a huge dependence on migrants bringing money into the country. The recent real estate surge is led by mainland Chinese paying ridiculously high prices for homes they fancy (such as the recent $1.68mil sale of a house in Strathconian, which estate agents would have been delighted to sell at $1.2mil). This surge has increased the "feel good" factor that often translates into higher retail spending.

Of course, there is a myriad of other reasons and predictions about the economy. Economic modeling and fortune telling has been practised for ages. They seem to go hand in hand (tongue in cheek).

1 comment:

Anonymous said...

Without the migrants this country almost got nothing to show. the china migrants are ridiculously splashing money and forgot about their hard earn money. Soon there will be more Chinese then Aneh in all the South Eastern regions.