Calling a commodity rebound

If anybody else put it out there they might be dismissed as a crank: While industry talks down the mining boom, Westpac's chief economist Bill Evans has made a massive contrarian call… he says commodity prices will lift by 30 per cent in the year ahead.

In the same week that Federal Treasury's David Gruen told a Senate budget estimates committee that ‘resource investment will not grow as strongly as we previously thought', and BHP's Marius Kloppers predicted a slowdown in growth for iron ore and coal, Bill Evans is suggesting something very different.

In fact the notoriously independent Evans says his 30 per cent price lift forecast can be applied across the board in the resources sector: ‘A rising tide will lift all boats' he suggests.

Asked if he's out of line with consensus, Evans says he does not know what the consensus is: Moreover, he's not even sure what the mining industry specialists are suggesting: It's the sort of confident call you could only make if you have been very right, very often.

For Evans that enviable position was reached during the last 12 months as the RBA entered an extended program of rate cutting. Evans had called for rate cuts in mid-2011 when nobody else was pushing in that direction.

But speaking to this doyen of bank economists – the longest serving of the 'big four' chief economists (Evans was appointed 1991, NAB's Alan Oster in 1992, CBA's Michael Blythe in 2001 and ANZ's Warren Hogan in 2010) – it is clear that publicity is the last thing he is looking for. Indeed Evans is more old school, an economist from the era before senior bank staff took to daytime television and Twitter… that is he is academic, dry and utterly beholden to logic.

For Evans, the logic behind putting his reputation to another public test stems primarily from one factor, he believes China's future growth is underestimated. Speaking after the slowest China GDP figures since 2009 were released yesterday – he is convinced China will grow next year at 8.5 per cent and it's from that ambitious figure his outlier view on the miners is drawn.

Again he cares little for what others – even global agencies – are predicting for China: He's figured it out for himself using his team at the bank.

And if Evans is right with his bullish call, it follows our big miners must be wrong. (Indeed iron ore prices have already lifted substantially in recent weeks).

Asked why the miners themselves are not as bullish as Bill Evans, he denies flatly it may have something to do with the forthcoming demands from the mining tax (MRRT), rather he puts it down to something a little more coy, "I just don't know… maybe they want to under-promise and over-deliver,” he suggests.