The Economist turns bearish on Aussie economy

By Leith van Onselen

The Economist has joined the conga-line taking a bearish view on the Aussie economy:

[Australia’s] housing market is now one of the most overvalued… Household debt has reached 200% of disposable income… The saving rate is skimpy…

House prices have been falling for a year… Australia’s banks may not have been quite as conservative as previously advertised. The share of interest-only loans, favoured by speculators, was as high as 40% (it has since fallen)… The number of permits issued for apartment buildings has fallen…

The momentum that drove the market up, as higher prices fuelled expectations of further gains, works in reverse too.

The lucky country has avoided so many potential slip-ups that even long-standing bears are wary of predicting a fall… The more banana skins you dodge, the bigger the manhole waiting for you.

Welcome to the club.

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Unconventional Economist
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Comments

  1. Sitting with my few hundred gorillas ready to go. Some is usd. I have a depression proof job. Ready and got an itchy trigger finger.
    Need a real hard winter ahead to cement the poor sentiment

  2. The Economist. Like most in the MSM, either late or wrong. Or more usually wrong then late.

    • It was only a couple of months ago they ran this gushing special feature on Australia

      https://www.economist.com/leaders/2018/10/27/what-the-world-can-learn-from-australia

      “Rising incomes, low public debt, an affordable welfare state, popular support for mass immigration and a broad consensus on the policies underpinning these things—that is a distant dream in most rich countries. Many Western politicians could scarcely imagine a place that combined them all. Happily, they do not have to, because such a country already exists: Australia “

      • Does anyone still read it. Still, it’s kind of typical modern economics. No analysis ever. Just social opinion.

      • Yes Dan but they will claim Australian banks conservatism was falsely advertised, neo liberals are never wrong

      • The irony is that Australia is in some ways, the poster child for a lot of things the Economist guns for – open borders and liberal markets. I can’t wait for the report on how these turned out to be our undoing.

  3. Well…. Just had a guy cancel a $1400 order as his contract not extended and must now count his pennies until he gets a new job. First the houses, then the jobs. Then the pitchforks….

  4. Here’s an update. $200m worth of Telstra incomes have disappeared, $600m to go over the next 12 months.

    $800m missing from an economy will be felt nationwide. Thank God we can fall back on our manufacturing and advanced manufacturing industries to step up production, increase worker wages, and cover the gap.

      • Divide et impera

        Was speaking with a cafe supplier a few months back – just did the big reno and the big new house. Doing ok – not great but ok. Supplied boutique products, incredibly elastic, spontaneous purchase products.

        Asked if they were worried about the downturn ?

        No Chance – absolutely no chance – people will ALWAYS want their coffee in the morning and cafes simply never go broke.

        I felt dizzy just looking at him.

        “Yeah exactly – those Porsche SUV dealers wont be going broke either – people need to get around don’t they ?!”

        I wish I said……

      • “Always want their coffee” he might be kinda right but in a recession Nescafe 45 (or whatever that instant coffee is called) will do just fine & people will drink it at work not in his cafe. Some people have no idea. (like the guy who works in the coal industry said to me the other day, “they’ll always need coal for power”)

      • Nescafe42!! I know it well. The whole ‘coffee’ thing is such BS for the ponces. Just like the country as a whole really.

      • Or for the almost-broke who still want to feel special – Nespresso! It’s sorta like instant coffee with a shiny real-estate-agent suit on. 70c a pop so cheaper than a cafe coffee but still allows you to adopt airs of [email protected] that International Roast powder and urn water in a polystyrene cup simply can’t match.

    • Don’t forget the 6000 jobs NAB are offloading. Other banks will probably have similar sized programmes in place soon too.

  5. Wow, the writer doesn’t seem too sympathetic…

    How dare he call our army of Mum and Dad investors “speculators”…all they wanted to do was own someone else’s home and live off their backs whilst in retirement? Terrible….

    😉

    • There is a massive thread over on whingepool about house prices. There was one poster of a certain ethnicity that would continually state he just wanted a passive income (read, sit on his arse and get paid) and just wanted to put food on his family (sic) and didn’t see a single thing wrong with screwing younger people out of housing just so he could “get ahead”

      There has been so many in this country that got to ride the gravy train and were totally “screw you, I got mine” without a shred of thought about others nor how this might play out. Totally blinded by greed.

      Let it burn.

      • whirlpool, the dumpster fire that is Australia’s culture all contained in a single site.

        and it used to be a really valuable tech support site a decade ago. I guess there isn’t as many clicks and ad dollars in that compared to an online whinge-fest

      • whirlpool, the dumpster fire that is Australia’s culture all contained in a single site

        Yes, horrible, horrible site. If you don’t subscribe to the zeitgeist or have differing opinions on anything, the opposing faction will herring your posts and before long you’re banned. Net result: out of control groupthink. Ugh.

      • “ just wanted to put food on his famIly” 😂 lol

        He has. If a sh!t sandwich counts as food.

  6. “The Australian banks might not have been conservative as previously advertised” —- Economist escape clause in effect

    • Yeppers, using a BS, illegal HEM for 70%+ of the mortgages, that now sit on their books. No worries, mate, she’ll be right.
      Next week is going to be EPIC. If they delay the release of the RC, WOW, could be Aussie LBH moment. If RC comes out with recommendations that the Big 4 have to actually verify incomes, boom goes the dynamite. The incomes aren’t there, full stop.

      • I think the big 4 have largely switched to the income verification you mention, and this is the reason for the credit-crimping slowdown that east coast property in particular is experiencing now. I don’t think the RC will change much in this regard.

  7. Offtopic, but think of the effect on greenhouse gases. Most of our target in meeting the turnbullson protocol was in agreeing to consume lattes instead of international roast. Major reduction in methane production right there.