Big bank economist’s unite in bubble denial

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Wow. The banks are spooked. At the AFR,  the economists of the big four banks have come together in a single voice:

Australia’s four leading bank economists have a blunt message for Canberra: pass the budget or risk destroying already fragile consumer confidence.

On the day Parliament resumed, with Treasurer Joe Hockey’s federal budget still up in the air, Bill Evans from Westpac, Alan Oster from National Australia Bank, Michael Blythe from Commonwealth Bank of Australia and Warren Hogan from ANZ found themselves in the same room at the same time and made it clear that a failure to strike a fiscal compromise could lead to a shock to the household sector.

In an exclusive interview with The Australian Financial Review, the four declared there was no housing bubble and that the Reserve Bank of Australia is being too pessimistic in its outlook for growth.

The irony is that by far the most important reason to fix the Budget – that is, run surpluses –  it to protect the government guarantee that underpins the big four bank’s housing bubble.

The ill-considered group confession appears to be a reaction to yesterday’s Jeremy Lawson piece published by Chris Joye.

The lady doth protest way too much, methinks.

Houses and Holes

Comments

  1. The irony is that the only reason that fixing the Budget – that is, running surpluses – is only important because…

    Too many onlys.

  2. pass the budget or risk destroying already fragile consumer confidence

    Er, actually, the budget as originally proposed crushed consumer confidence. Confidence has bounced back because its become apparent that most of the budget won’t pass the Senate.

    The worst possible outcome for consumer confidence (and animal spirits) is for Hockey’s budget to pass unscathed.

    • “The worst possible outcome for consumer confidence (and animal spirits) is for Hockey’s budget to pass unscathed.”

      Yes exactly.
      How ironic.
      Consumer confidence increases when a govt is prevented from doing what it wants.

      What the hell does that tell you.

      • We are passing gently into a deflationary depression.
        Debt really, really hurts during deflation.

        That’s the reason for the panic.

        Anyone with big debt, including government will be slaughtered.

      • interested party

        ath,
        gently at this stage…….and slowly to change to not so gentle as reality hits home to the great in-debted. I do agree with the depression angle though. It is an inevitable part of the cycle and will not be denied…no matter who say’s differently.

  3. For the banks creating debt/money makes P-P’ immediately, without the risk of real economy long production process and uncertainty. It is the sweetest and the quickest way of wealth growth and stealth theft.

  4. This is what they’re paid to do. But yes, coming altogether like this in a major media outlet is a bit unprecedented. A copy of this will be convenient to have when everything hits the fan and the same four people are begging for bail-ins.

    • It is more exquisite than that.

      If the Hockey budget passed/unpassed is deemed, rightly or wrongly, to be the turning point, then the coming correction will be the Abbott Government’s fault. All those mortgaged to the hilt, and there are a lot of them, will hate the L/NP forever. Amen.

      Still, there is more ammo in the hold, so the Adults will fire that off in the vain hope the inevitable revert to mean can be delayed.

    • There will be no begging, the big 4 + macquarie will be given free access to taxpayer, bondholder and depositor cash when the time comes. Whether it is via government ownership of toxic debt or just direct theft, it *will* happen because if Australia is good at anything it is (corporate) socialism.

  5. Must be a coincidence that 4 economists from 4 banks end up in the same room offering the same opinion.

  6. The government could always get rid of the bank guarantee, let the chips fall where they may, but if it goes I’d want more than 3 percent for leaving my money with one of our property obsessed banks.

  7. interested party

    Wow, very telling on how worried these people really are.
    If this whole economy swings on ‘consumer confidence’ then we are in trouble. The ducks are lining up, I just hope we get a steady reversion instead of a big-time bust. That will not help anyone. This consumer just lost his confidence.

      • interested party

        Yep, that’s my fear……..I really want to be wrong on that. We are sailing so close to the wind on this…..one wrong step and it is ‘good night, Irene’.
        Steady hands and level heads are required to steer this ship at the moment…..and we have Abbott and Co……good grief!!!!!

  8. These economists probably thought the obstructionist stupidity has run its course. Time to get on with business.

      • http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2479439

        “Finally, our results suggest that citizen attitudes toward economists as trustworthy sources of information are mixed, but relatively uncrystallized. While there is a slight partisan bias in trust judgments—with right-wing affiliates somewhat less trusting on average—demographic and political factors explain very little variance in trust. Consistent with this claim, we find that citizens use trust judgments more as a tool for reinforcing priors (Kahan et al. 2011) than as a heuristic guide for forming opinions on complex policy issues (Lupia and McCubbins 1998). In other words, at present, trust judgments seem more likely to be rationalizations of a preferred policy than a latent propensity to follow economics experts across varied contexts. More generally, our empirical findings of aggregate responsiveness averaging across issues, large responsiveness on technical issues of low salience, and motivated skepticism on salient and symbolic issues, suggest both the ability of experts to change public opinion and important bounds on this ability. This implies a need for those wishing to use such experts as tools for persuasion to consider strategic issues of message timing and framing in crafting their appeals to the public”

        It’s difficult to decide what is your more hypocritical position – complaining about obstructionism, or trying to blame it on Labor and the Greens.

    • “These economists probably thought the obstructionist stupidity has run its course. ”

      Why, because Mr Abbott is no longer opposition leader?

      Maybe Mr Abbott shouldn’t have burnt what little political capital he had with the Greens while in opposition? While I believe the Greens should support the fuel excise increase, even though I’m a low income earner myself, I understand why the Greens don’t trust Abbott or the Coalition.

    • interested party

      3D, the best we can hope for is to get through this period with the least amount of damage to the economy. It will be some time before this band of peanuts in Canberra retire or get removed by the puntertariat. We just need to limit the damage somehow.

  9. March Australia,
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    Double sided flyer available to download now, covering negative gearing, housing affordability, homelessness, and youth unemployment. This is written in ‘plain English for our target audience.
    Click here for PDF.
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    Click here for Word online.
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    I would urge as many members and readers as possible to download and distribute this flyer.
    With the present Senate enquiry into housing affordability, the Murray financial system enquiry, the enquiry into foreign investment in residential real estate, and rumours the Australian Treasury is toying with the idea of limiting negative gearing to new dwelling only, now is the time to strike, “While the iron is Hot”. We all know because of “conflicted Politicians” that little good will come out of these enquiries, so we need to send them a strong message.

    To quote from the Peter Finch movie ‘Network’ “I’m as mad as hell and I’m not going to take this anymore”. Watch it you young guys, you may learn something.

    Also please read and download this excellent flyer from ‘Uranium Geo’.

    PDF https://dl.dropboxusercontent.com/u/68931317/Negative%20Gearing%20Pamphlet.pdf

    March Australia, Rally and March on Sunday 31 August, at 1pm, State Library of Victoria. March to Parliament. Please Note: Rallies are being held all over Australia. See the website for dates and details. http://www.marchaustralia.com/

  10. what do you expect these vested interests to say, there is a bubble and their banks are sitting on timebomds? have spoken to two of them privately and pretty much neither really had any idea about the true state of the housing market. When one mentioned to me that housing investment loans were only taken out by those who could afford them, I gave him the stat from the ATO that the average income for claiming neg gearing was $78k. He was literally red faced and gobbing for air and had no answer. Frankly none of these guys have any decent data and the information they do chose to look at suits their own view.

    Hogan did raise an interesting point about finance being lowest in years.I find this hard to believe but would love some hard stats to prove the error. There is an Australian Banking & Finance shindig in Melbourne tomorrow where we get to hear from these 4 all over again. Not bothering going cos I know it will be the same old rubbish.

  11. What is the collective noun for the Chief Economists, from the big four?

    A Pack of Pander’s ?

    • Can you differentiate them from bankers? Still collectively a ‘wunch’ as someone suggested yesterday.