Ric and the world


Busy day today so we only have a little time for this post. We will discuss this in more depth at a later time.

We went and saw Ric Battelino speak today. He was far more bearish than we expected, he even said the words “bubble”, “demand”,”property” and “Queensland” in the same sentence. He gave a quite frank account of the economic woes of Japan, Europe and the US along with his ideas about the systemic reasons behind those problems. He did an overview of Australia and the fact that the country was riding on the resource demand from developing nations ( China and India ) and how this was likely to last for some time yet given the history of steel demand of developing nations. He talked about the need to manage the economy properly at a time when there was large amount of capital in-flow, and how a floating exchange rate was helpful in controlling inflation.

He did however slip up a bit. He made the classic mistake of suggesting that Greece’s problems of debt were the same as the US and could be managed the same way. He was quite weak on his explaination of what he thought about Quantative easing, suggesting that it didn’t seem to have had much effect but he didn’t think there would be any long term problems, even though the US had quadrupled its money supply without fixing anything. He didn’t seem to really understand that the economy of the southern european nations was actually being hobbled by German domestic policy, alluding that it was all the fault of the Greeks by not controlling costs of production. He also made the scary statement that Queensland was running well under the nation average for growth, he didn’t really know why (although he made some statements that it may have been to do with falling tourism numbers due to the high dollar) or how to fix it.

To us he seems like the type of economist who knew his stuff, until he was pushed to validate his answers. He is probably good at the day-to-day stuff but was unlikely to see a crisis coming or have any idea what to do when it arrived.

Overall we would have given him about a 6.5 out of 10……

Right up until question time, when the faith driven economics appeared.

It was obvious that the CBA debacle was on his mind, because someone asked a question unrelated to property and he launched into a well-practised rant about how “Australia is different” and overseas investors don’t understand the Australian property market.

His points were the usual suspects, and some amazingly, were a repeat of same data CBA has been getting trashed for.

  • Prices are only 4.5 time income.
  • Unlike the US we have had strong income growth that has meant house prices have grown.
  • We have low rates of mortgage defaults and that proves everything is fine.

He made no mention of the massive rise in public debt over the last decade at anytime during his speech or how the change in demographics was likely to effect the country. Overall the speech had the feel of “Sure Europe and the US are stuffed, but Asia is fine so we are too, we are aware that other country’s economies have gone horribly wrong due to speculation in property but we will be fine”.

Interesting, but a bit worrying at the same time.


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Comments

  1. One can't help wondering how many investment properties this low-wattage spruiker Battelino has himself. I'm thinking more than a few.