Some free advice for John Kehoe

I like John Kehoe. He has talent. But he should be careful of what company he keeps:

One quarter of soft economic activity does not make a trend, so chatter about the Reserve Bank of Australia being forced to switch its bias to interest rate cuts is premature.

…the fundamentals for the local economy remain sound. Unemployment is a low 5 per cent. Corporate profits are strong, helping the federal budget roar towards surplus. Consumer sentiment is elevated. Wages are showing flickering signs of improving, as the labour market tightens.

…As HSBC’s Paul Bloxham and CommSec’s Craig James both point out, people do not measure the value of their home each month. A lower house price may only become apparent to individuals if they are selling their home.

You want to bet? That’s all Australians do these days. They do so obsessively. The irony is that two permabullish bank economists and the RBA deny it. Multiple rate cuts are coming to humiliate them all.

Playing it safe in journalism may get you a pay check but it won’t advance your career much when you start being wrong all of the time.


  1. Someone better tell the developers/builders that crashing prices only matter if you’re trying to sell houses and apartments.

    He is right about this though:

    Unemployment is a low 5 per cent. Corporate profits are strong, helping the federal budget roar towards surplus. Consumer sentiment is elevated. Wages are showing flickering signs of improving, as the labour market tightens.

    That’s pretty much a summary of the RBA minutes from a couple of days ago.

    • Profits are weak outside mining. Consumer sentiment is weak cyclically adjusted, wages are topping as labor leading indicators roll over.

      Meanwhile Sydney house price are accelerating downwards towards -20% per annum. By Q1 there will be panic.

      He’s wrong and he always will be if uses a rear vision mirror.

      • Agree with you 100%, I’m just wondering whether the RBA sees it this way.

        I’ve gone from convinced they’ll cut H1 to now I’m not so sure. Starting to think they’ll look through the deterioration until it’s much too late; reactive as opposed to proactive. Would Stevens have cut by now? Lowe is still hawkish, even as a credit crunch plays out.

      • I am wondering what it means if US Fed stops raising but stays with the 60 billion a month run down of assets? It seems a two pronged approach (attack). Is Australia in teh same boat, can we hold rates but have QE instead, seems both at once would bd very ambitious.

  2. Haha – i’m sure they don’t. So what is the wealth effect based off then? Magical animal spirits??

  3. HSBC and CommSec. Just the people to rely on for frank and fearless unbiased financial advice.

    • CaptainFeatherSwordsGhostLivesOn

      They’re pretty good at embezzlement and money laundering. I’d listen to their advice on that, lol

  4. Honestly, I think this was a good piece. Sometimes we need to sit back and consider that we could be wrong. The truth is most people probably do not look at the value of their own home – What is the average length of time that someone holds a home? If we consider the whole housing stock, 20 years? What kind of person marks to market every five minutes. The only time when the levered housing stock takes a hit is when a) jobs are lost b) banks crash c) interest rates rise. Not happening in Australia yet. So it was a well considered piece.

      • Exactly – these are the people who are checking – they spend the equity on consumption and that will screech to a halt.

        But I also think there are people who don’t check the price of their house but do have a general sense of “up” or “down” and this must affect their confidence and spending. Otherwise why would there be a “wealth effect” at all?

  5. I agree people do measure the value of their home. Someone I know regularly checks sale results in their locale to gauge their own home’s value

    • I have heard of some who talk about their annual income including capital gain, in fact where wasn’t much other income to speak of.

  6. Someone is lying.
    Big time lies.
    And Canberra & the ABS or the RBA aren’t kidding anyone with their highly politicised lies.

    Roy Morgan today. December 6th 2018.
    Australian unemployment is now 9.5% and under-employment is 7.7%
    A record total number.
    It’s only ‘a slightly lower percentage of the workforce’ because the workforce has grown thru migration.
    And the migrants are low income causally employed.

    So in real terms ‘Australian full average wage employment’ has fallen for Australians.

    The latest data for the Roy Morgan employment series for November shows:

    The workforce which comprises employed and unemployed Australians is now 13,585,000, up 411,000 on a year ago.12,294,000 Australians were employed in November, up 408,000 over the past year;

    The increase in employment was evenly shared with an increase in part-time employment of 217,000 to 4,184,000 and full-time employment increased by 191,000 to 8,110,000;

    1,291,000 Australians (9.5% of the workforce) were unemployed in November, virtually unchanged on a year ago but with the unemployment rate down by 0.3% only due to the growth in the workforce;

    In addition 1,042,000 Australians (7.7% of the workforce) were under-employed, working part-time and looking for more work.

    In total 2,333,000 Australians (17.2% of the workforce) were either unemployed or under-employed in November, a decrease of 61,000 in a year (down 1%);

    Roy Morgan’s real unemployment figure of 9.5% for November is significantly higher than the current ABS estimate for October 2018 of 5.0%.
    You bet, ‘nearly double’ higher.
    We have 2.2 million Temporary Residents.

    650,000 NZ SCV of which 230,000 are non NZ born using NZ as an entry point – full work rights permanent stay.
    624,000 foreign students & partners dec 2017 (673,000 is the Dec 2028 estimate) of which 75% are in visa breach working & living illegally.

    165,000 bridging & protection visas. All with full work rights on a nonsense excuse, 3 to 5 year extra stay as they rort & fraud the appeals tribunal.

    160,000 so called skilled but only 70,000 are primary & only 11,000 are genuine high unique skilled.

    150,000 working holiday but get this – only 40,000 ever ever do 3 months rural work (12,000 FTE yearly) which means 140,000 at least work & live in the main cities.

    And so on – total 2.2 million Temporary Resident migrant guestworkers on some form of visa alibi.

    ➡️ 1 migrant guestworker for every 1 Australian unemployed or seeking work.

    And no jobs in the regions or rural areas.

    The Australian youth unemployment rates in those areas are 20% up to 40% !

    It’s not the PR but the migrant TR are sucking up the jobs. The TR onshore are now equivalent to 14 years of PR intake.
    Forcing Australians including the new PR migrants to the margin and on the dole.
    Our Centrelink payments alone are over $26 billion of which at least half is caused by the uncontrolled migrant intake. The PR migrants on the dole (up to 46% in a number of ethnic groups, and Australian youth & mature age unable to get a proper paying job.

    That’s why real wages are falling.
    That’s why permanent full time jobs are disappearing for Australian youth & mature age.
    2.2 million migrant third world unskilled temporary residents, the majority on a visa pretext and at least 1.5 million in some form of visa breach working illegally.

    Low paid casual migrant guestworker jobs as working illegally.
    $20 an hour shelf stacking & cleaning jobs.
    $20 an hour 711 or Caltex jobs with the foreign guestworkers under 2 or 3 names & fake Timesheets.
    $20 a hour but $10 cash back by the migrant to their manager or employer.

    This is systemic & mass scale now.
    That’s the real picture.

  7. “Playing it safe in journalism may get you a pay check but it won’t advance your career much when you start being wrong all of the time.”

    And yet Michael Pascoe exists?!?!?!

  8. He’s right in that people don’t look at the value of their home, but they obsessively look at the value of other people’s homes. Keeping Up With The Joneses and FOMO are the psychology behind the property #hyperbubble. That’s been their whole life and experience, so many are finding it hard to adjust to and accept the new paradigm.

    Also, the banks are letting people get *years* behind their payments. I have a family member who has three properties, all in a state of disrepair, and all with the promise they’re going to be renovated, and the banks just let her descend further and further into the hole they’ve dug together. I have to wonder when will it end?