Ex-RBA economist Luci Ellis wants to take credit

“I’m happy to take credit for that one.”

Truly! Ellis, we’re assured, was joking. Though, who’s laughing?

Ellis joined Westpac in October, replacing the retiring Bill Evans after spending 15 years at the RBA. Nearly seven of those were as the central bank’s assistant governor (economic), that is: the RBA’s chief economist.

The Ellis-era at the RBA is marked by a couple of what must now be the worst forecasts in modern central banking history. In February 2021, then-governor Philip Lowe told the parliament’s economics committee that the RBA forecast inflation to be “1¼ per cent” in 2021, and “next year to be just 1½ per cent”.

As we know now, inflation hit 7.3 per cent by the end of 2022 – the highest CPI figure since 1988.

Ellis and Bullock sat next to Lowe during the public appearance. Lowe added that interest rates “are going to be low for quite a while yet”, flagging economic conditions were unlikely to lead to rate rises “before 2024”.

There have been 13 rate rises since May, 2022.

In September at the same committee, Ellis raised Russia’s invasion of Ukraine as one of those “unforcastable events” that caused inflation to spike. She said that she and her team of wonks “didn’t fully understand” how the invasion would ultimately impact coal prices and the electricity market.

It was a reason for the massive RBA miss. She said “it is impossible to forecast perfectly”, and the errors would lead to “reflection and re-evaluation [with] extreme vigour”.

But how many tens of thousands of Australians took out what would eventually become floating rate mortgages in 2021-22?

How many more thousands of dollars per month are they paying in extra interest, many of them to Ellis’ current employer, because they worked under her assumptions?

And how many of Westpac’s clients placed bad trades after taking heed from her October note saying there was “nothing in the data to nudge the RBA in the direction of raising rates”, before inflation data led to her revising that guidance six days later?

Ellis knows it’s silly to take credit for one accurate forecast during her RBA tenure. But a nice reminder that while the chief economist’s life is by crystal ball, there’s always someone else eating the shattered glass.