Evans shares economic predictions

THE housing market has been the real surprise of the past 12 months, Westpac chief economist Bill Evans said during an event in Geelong.

Mr Evans again headlined the Westpac Economic Breakfast, one of the annual highlights of the Geelong Small Business Festival, held at GMHBA Stadium on Thursday last week.

He has been sharing his forecasts on the state of the Australian and global economy in Geelong each year for nearly 20 years, and spoke for more than an hour at this year’s breakfast.

A Cats supporter, Mr Evans also makes AFL grand final predictions as well as economic forecasts every year and successfully tipped in 2022 that Geelong would win the flag.

“Well done, thank you very much, that was probably the best forecast,” he said.

He forecast last year that dwelling prices would drop 10 per cent in 2023, but they instead rose by 7 per cent this year.

“That’s the one I really got wrong,” Mr Evans said.

“That’s been the big surprise in this cycle, why house prices really rebounded this year.”

He said this could be explained by global factors including labour shortages and an accumulation of savings, including transfers from “the bank of mum and dad”.

“If you’re in a situation where your partents own a property, then you’ve got a way out – if you’re not, then you’re in real trouble in terms of what’s going to happen going forward.”

On housing, Geelong dwelling prices have fallen further than other Victorian regions in the past 12 months but have risen at a very similar rate over the past few months compared to dwellings in inner Melbourne and north-west Melbourne.

Mr Evans said vacancy rates in rental markets had tightened quickly, and were below 3 per cent in Melbourne and even lower in Sydney, Perth and Brisbane.

“Geelong vacancy rates might be less than 1 per cent. We haven’t seen anything like that before.”

The weak state of the Australian economy could partially be atributed to the consumer, Mr Evans said, with the consumer sentiment index at 81; the lowest level in decades.

“It is now at the lowest it’s been since the deep recession of the early ’90s, and boy, does Geelong remember the deep recession of the early ’90s when Geelong was right at the centre of the financial collapse that affected the whole of Victoria.

“People are incredibly pessimistic, and the reason is not interest rates – the reason is inflation.”

Inflation is down to 4.9 per cent, which Mr Evans said was great compared to 7.8 per cent, “but people are still saying prices are too high”.

“We just need to have people thinking that inflation is under control; that’s going to take time.”

Mr Evans will step down as Westpac’s chief economist in January and become a senior economic advisor for the bank, but confirmed he would return for the 2024 Westpac Economic Breakfast in his new role.

“I’m not sure what [the role] is going to mean but I know there are some things that it won’t mean: it won’t mean HR, it won’t mean compliance, it won’t mean media… some of the best parts of the current job I’ll miss,” he quipped.