Bloxo: interest rates to rise but no bubble

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There’s nothing better on a Friday than a nice dose of HSBC chief economist, Paul Bloxham.

According to Bloxo, interest rate are going to rise in 2016. From Forex Live:

HSBC Australia chief economist Paul Bloxham says he expects the Reserve Bank to hike interest rates in 2016

[He] says also that the government could boost growth by postponing its attempt to balance the budget “until 2016/17 when the economy will likely be stronger”.

“The government tried to tighten up fiscal policy last year when the mining boom was over. When growth in the economy is sluggish, that is not the time to tighten fiscal policy.”

Righto Paul. You honestly believe that interest rates will rise into the biggest mining capex unwind in Australia’s history (see next chart)?

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ScreenHunter_7086 Apr. 17 13.10

And while the local car industry shutters? Good one mate.

According to Bloxo, there is also no housing bubble, although Sydney house prices are “running at an unsustainable pace”. From Property Observer:

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“Sydney house prices are running at an unsustainable pace”…

“The more Sydney house prices go up, the more likely it is that they will have to correct, and that’s not necessarily a bubble”…

“I think that if Sydney sees the same trends as we have seen over the last year or two, that is house prices is running at an annual inflation rate of 13% year on year, then if that continues for very much longer than you will need to see prices at some point will come down.”

I’ll have what he’s having!

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.