The Australian risk scenario, presented to APRA

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David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Latest posts by David Llewellyn-Smith (see all)

Comments

  1. flyingfoxMEMBER

    Congrats! You guys are making headway despite the headwinds. (All puns intended)

    • Indeed, good work gentlemen, a nice presentation. And well done for being invited in the first place!

      My only concern is that “forewarned is forearmed”… Steve Keen did the forewarning at GFC time, I hope that you guys don’t play the Keen to the 2014 Government and trigger another inflationary “rescue package”.

  2. GunnamattaMEMBER

    Geez, gents, that sure is a classic set of charts with enormous implications. Can I ask what sort of reception it received from APRA?

    The thing I find kind of surreal is that nobody seems to placing all the pieces together like that and coming up with another plausible economic narrative for Australia.

    Simply nobody else anywhere – not government, not MSM commentary on the economy, not major industry groups and not banks – is laying out that narrative. Yet somehow the consumer sentiment data suggests that some people are realising.

    And it is the credibility of the existing body politic and MSM and major institutions that is dropping/going to drop into the gulf between what is being articulated here, and what is being articulated (and being far more loudly heard) elsewhere. If it does pan out with a once in a century style economic adjustment to follow on from our once in a century mining boom and debt binge (and I think it will) then there are going to be a lot of hard questions asked of the ‘elites’ of this place.

    • seanraceMEMBER

      +1 totally agree.

      Only time will tell.

      I wonder if there were any questions? Or did everyone just sit there stunned?

    • fitzroyMEMBER

      +1

      This is beginning to filter through to the wider business community despite the lack of mainstream publicity. What is not fiiltering through is the gathering together of so many threads to produce the tapestry. A great effort, well done.

    • APRA were great, it must be said. The preso was to supervisors, not the policy department, who tend to be risk averse and receptive. They gave us a good ovation and were keen for a chat during the morning tea.

      The questions were also good, with nobody taking a defensive stance.

      It certainly was not a case of “walking into enemy territory”.

      • Word from my banker friends the screws are tightening behind closed doors. LMI waivers for staff are even on the chopping block…

    • GunnamattaMEMBER

      Interesting you say that. As I was looking through I was thinking getting LvO and DLS commentary on the slides would be useful.

    • DelraiserMEMBER

      I can picture the audience now…..a combination of expressionless types who fail to comprehend, a couple of stunned mullets who have finally seen the light and a smirking David Brent type chuckling to himself in the background muttering quietly about bears and “it’s different here”…….all accompanied by the echoing chirp of a lone cricket

    • Yes – the last slide was great.

      First question from the floor.

      “But Luci Ellis reckons everything is FINE and she will let us know if anything bad is going to happen”

      Great series of slides and congratulations to APRA for inviting ideas from outside Club Policy.

      I look forward to a series of slides following a presentation to the RBA board and the Treasurer’s Office.

      Joe Hockey is the person who needs to get his head around these issues and fast.

      He and the government do not have the luxury of farting around with a tax summit and taking the worst options (read ineffective) to the next election.

      The govt needs to lead and make real decisions NOW rather than poking pensioners and welfare recipients with co-payments.

      • The govt needs to lead and make real decisions NOW rather than poking pensioners and welfare recipients with co-payments.

        That buffoon Hockey has blown everything on a budget of pure ideology. The Libs will spend the next two-and-a-half years offering the electorate bribes and sweeteners in a desperate attempt to regain some hope of re-election.

        That is the real tragedy of this budget.

        Come on 3d1k, spin that.

  3. Billybob McBob

    Great presentation guys, congrats for getting the invite and well done for putting forward a compelling message. I expect the chances of action off the back of this are slim to none, but still really important that these folks are given this sort of info. No claiming ignorance then…
    Big kudos to you both.

  4. Excellent presentation, well done guys. The last slide nicely points out we are between a rock and a hard place. What a shame we didn’t have an effective mining tax that could have shielded us from this.

  5. 1. Superb presentation.

    2. Great chart slide 17 “Finance & Insurance as a % of GDP” — the neo-liberal (usurer) agenda has much to thank Keating for (hence, Chairman of Corporate Advisory International at Lazard’s):

    “Labor had opposed financial deregulation before it took office, but once in power Keating removed financial regulations, including the ban on foreign financial institutions operating in Australia. Within eight months Hawke and Keating had “floated” the Australian dollar on the foreign exchange market, divesting the government’s power to control Australia’s currency.

    Labor handed the government’s power to set interest rates to the Reserve Bank. They also implemented the recommendations of the Campbell report into financial deregulation that had been left in the “too hard” basket by the Fraser government.

    These measures, now part of neo-liberal orthodoxy, imposed the judgements of banks and the financial markets on central aspects of the economy and removed any vestiges of government (and democratic) control. These measures also signalled that Labor had meekly surrendered any commitment to even the moderate social-democratic tradition of using parliament to gradually reform capitalism or curb the gross inequalities created by the drive for profit.”

    ****

    “Between 1983 and 1985 Treasurer Paul Keating deregulated the system by (a) floating the Australian dollar in December 1983; (b) granting 40 new foreign exchange licences in June 1984; and (c) granting 16 banking licences to 16 foreign banks in February 1985.”

    http://www.abc.net.au/money/currency/features/feat3.htm

    ****

    3. Slide 27 should read “positive” loop, not negative.

    4. Superb presentation.

  6. I do not imagine you happened to query anyone at APRA about their prime “strategic objective” of preparing for bank bail-ins, per Australia’s / Gillard’s 2010 G20 commitment, and as per the 2014-15 Portfolio Budget Statement?

  7. moderate mouse

    MB: “Any questions?….”

    APRA: “Yes, all the important charts such as house prices and finance sector size are going UP. I fail to see the problem. You Negative Neds need to know we only deal in good news around here.”

    MB: “Sigh.”

  8. Congratulations guys! It’s so important this information gets across to the wider public, especially people in positions to influence policy.

  9. Genuine question – in which European countries can you take your SS contributions as a lump sum prior to retirement? (and then spend it and collect a pension anyway).

    I’d love to do that with my UK state pension, I suspect I cannot.

  10. bolstroodMEMBER

    Thank you for this great presentation & break thru in being invited to put it to APRA.Well done, I hope they took notice.

    Climate related incidents are not factored in. I guess it is difficult to chart . The BoM are already predicting a super El Nino event for this spring & summer, if it eventuates it will certainly add to the negative side of the economic ledger.