Summary: A top down look at the year ahead, Saul Eslake

Here's a quick summary of the following ASX Investor hour presentation.

Topic:  A top down look at the year ahead, Saul Eslake, Grattan Institute

Australian Economy:

• Linked to mining, which is linked to China.
• Australian is the only country to supply 3 main China commodities: Iron Ore, Coal, Gas.
• Strength to continue for a number of years.
• Low government debt compared to other "Advanced" economies.

Housing:

• Does not see much growth in 2011
• But does not think that a crash is likely
• Will see growth beyond 2011.

Inflation:

• Does not see inflation in the near future as a major problem. 

Interest Rates:

• Thinks they will remain constant for 6 months
• Maybe 1 or 2 rises later in 2011.

2011 Economic Survey

Economists make poor predictions.  In today's The Age newspaper, various economists made predictions about various economic metrics for 2011.  I noticed that to protect the article's credibility, they didn't publish last year's predictions and results, because that would just make the economists look silly, and there predictions for 2011 obviously useless, rather than just useless.

I also note that of the 21 economists that made predictions, all but 4 work within the finance sector, and hence have a vested interest in a bullish performance.  It is not surprising then, to find that the two most bearish predictors are Steven Keen and Jakob Madsen - both academics.

For 2011, these 2 bears predict that interest rates will fall to 4.125%, the AUD/USD will fall to 90c, the ASX200 will fall to 4350 in July, and to 4000 by EOY.  Yes, I did some averaging to get these numbers.

I have no idea what 2011 will bring to Australia.  There are certainly a lot of risks present, including an impending housing market crash, an impending Chinese growth crash, a Euro breakup or default, more US housing/banking foreclosure debacle. 

What can an investor do under these circumstances other than play for safety, and wait for value?