Is Australia headed for financial crisis?

Nugget’s News has released a special presentation, entitled Australia – A Coming Financial Crisis, which explains “the systemic changes that have taken place in recent years that have now put Australia’s banks, property market & economy at risk of a financial crisis or economic collapse”.

The presentation covers a wide gamut of data and includes testimony from Fund Manager Roger Montgomery, as well as Digital Finance Analytics’ Martin North. It also covers many of the themes discussed on MacroBusiness over the past eight years.

Well worth watching.

 

Unconventional Economist
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    • lol

      Because their audience is the Austrian sky-is-falling vengeful-god Armageddon crowd that is prevalent here and zerohedge etc

      • I always feel more stupid for having read the comments on articles at ZH. The total opposite here at MB.

      • I’ve not noticed too many ‘Austrians’ here (unless you meant to say ‘Australians’) — most are advocates for modern-day, neo-classical economics, in my experience i.e. we need a lower currency to boost exports, inflation of 2% is a good thing, deficit spending is gr8 etc …

        ‘Austrians’ are advocates for the Austrian school of economics — closely related to Classical economics. Quite what this has to do with armageddon and prepping only you could say.

      • You’re a cretin Dominic

        If you hadn’t noticed deficits are anathema to neoliberal economics

        I’m not sure how you could be so slow that this could pass you by

      • If I’m a cretin I’m not sure where that places you — in fact I don’t think they’ve yet invented a word for it.

        In case you hadn’t noticed, peanut-brain, deficit spending is de rigeur for parties of all political stripes these days and actually has been for decades. I grant you there is occasional talk of ‘budget restraint’ by pollies but this is merely fodder for impressionable chimps like you.

    • People selling gold and crypto are always predicting global doom. Vested interest. Be very sceptical.

      MB is pretty bearish but doesn’t do gold or crypto and the MB fund is long only. I think this makes it more reliable.

      • Didn’t know they were pushing gold or crypto when I watched it yesterday. Overall it’s pretty sensible analysis, much in line with what the guys here have been saying. I think as a country that this thing has gone on for so long that any time someone points out the risks that have built up, they are immediately dismissed as a crashnik. God knows it’s gone WAY longer than I ever thought possible.

      • Timmeh I think that’s right. gold and crypto bugs aren’t automatically/ necessarily wrong, I’m just more sceptical of them because of their vested interest angle v

      • It’s not very different. They’ve found an audience and sell a narrative of hope to permabears.

        I don’t necessarily think that’s wrong… I think they believe what they write, but so do most of the gold or crypto bugs.

      • MB sell content. They do not give away content in an attempt to convince you to buy their actual product (gold, crypto etc).

      • yeah, I like watching Keiser Report for Stacy – but as soon as Max spruiks crypto or gold – i’m out….

  1. unconfirmed at this stage but NAB are laying off staff and are encouraged them to re-apply for new roles on offer

  2. Heading into a “financial crisis”? No no no no no…..we are already in a “financial crisis”…. & crypto is rubbish. If one does not own anything physical one does not own anything ……

    • So stocks are rubbish? Cash in bank is rubbish? Only hard physical assets I have are made of rusty steel (vintage cars). 😀

      • @ Gavin. You obviously want me to give you some attention and “pat you on your head”. (the one in which your grey matter is residing)
        Financial Instruments & “cash in bank” are vehicles to purchase “hard physical assets”
        Also food and land are physical assets. (grow food on said land)
        I’ve done enough “spoon feeding”.

  3. A actually pray for a financial crash
    I have a depression proof job
    I also pray that the re spivs get theirs. And more

  4. Revisiting the Interest Only numbers is where we are vulnerable. 600 billion? is that correct? that’s at least a million mortgages and 35% this year and next are up for roll over or roll off. If just 10% of that number sell its 35,000 more properties on market each year, but it could easily be 20% too.

    The downward pressure is just beginning

    • Haven’t IO caps been removed by APRA – ie no need for the rest of the reset (as long as borrowers qualify for refinancing at current levels, which is by no means certain) ?

      • Spot on. The banks don’t want their loan books to amortise down given lending growth has slowed, so they will extend the IO period. There won’t be a reset, just a can kick.

      • Change in serviceability assessments means many won’t qualify. Class legal actions will keep serviceability assessments tight – no change there anytime soon.

      • as per tonydd comment even 5% due to stricter lending standards and the house of cards will fall. I call it this year and starting from May (just for the elections) with the real bloodbath somewhere around Sep when real panic sets in.
        Only thing that can save (postpone it that is) the crash is if lending standards are removed again. Speculation will come back and prices will go up about 30% where we are going to hit peak borrowing capacity. Then it will be just like watching skiing downhill comp..

      • I take this to mean (change of cap), existing IO borrowers can continue as IO borrowers, (refinance IO with IO) instead of sinking the Titanic, (for now anyway). But does that mean there’s no room left for new IO loans if they’re being used for refi? And who’d be dumb enough to still want one? Always someone I suppose.

      • I expect it to play out here just as it did in Europe and the USA. When new, tighter rules trigger a crisis, the rules will simply be suspended. Eg, Basel2 mark-to-market enforcement in the US (suspended by Geithner during the GFC), or TARGET2 collateral requirements in the eurozone (suspended by the ECB during the GFC). Extend and pretend.

        I’m making a call that the RBA is going to engage in QE much sooner than people expect, taking bad mortgages onto its books as repos from the banks. Hand-in-hand with that, Treasury will be issuing an equivalent amount of government debt that banks will then buy with fresh reserves. (Ie, banks swap toxic mortgages for safe government debt via the RBA’s book). This will require the government to run a “mortgage relief” program (bailout) that will be popular with the electorate…..(well, it won’t be popular with ME, but it will be popular with specufestors).

        Note that all other major central banks have run into trouble when trying to clear their books. QE-infinity is here to stay now and the expanded central bank balance sheet is going to become a mainstay of monetary system management, as important as setting rates. What was supposed to be an exotic emergency measure has become normal.

        The RBA is odd man out at the moment. As it becomes clear that QE-Infinity is here to stay, it perhaps won’t be perceived as so much of a big deal for the RBA to go hard into QE in the near future. I’m expecting it.

      • @Arrow2: yeah, AUD will probably be lower for several reasons.

        #1: popping RE bubble will shake out foreign investors, as they exit property into AUDs, they then sell AUDs back into foreign currencies to pursue investments elsewhere (unless they reinvest in, say, Australian government bonds). As they sell AUDs, it takes down the AUD and as the AUD falls, it amplifies negative equity for foreign speculators and motivates them to sell even more (spiral).

        #2: international perceptions. As the RBA takes private debt onto its book and the government replaces this with public debt (huge splurge of bonds being issued), then it looks bad from a speculator’s perspective. Public replacing private. The capital class tends to run from that -> lower dollar and a spiral down.

        #3: splurge of debt will take down yields on sovereign debt (assuming the RBA is aggressively and willingly on the bid via the banks). Collapsing yields (and associated rates) destroy anyone who’s running a carry-trade with the AUD. As they close out of their positions, it’s another spiral down. Same story for fixed income investors.

        After the shakeout though, it may turn around if ZIRP triggers asset market inflation again, and a destroyed middle class pull back on spending (which tends to be on imports). If we’re still exporting resources, then we may find ourselves running a current account surplus, arresting the AUD’s fall and sending it back up again.

        But beyond the AUD, the real “price” here is that we have a neoliberal government with absolutely no idea what to do with money other than pad out the pockets of Globalist Mates. The heat and light of a real estate bubble and the credit it created will disappear into the void of the RBAs book. In its place, government debt will struggle to find anything productive and meaningful to do. Parasites and predators will hoover it up, incompetent officials will squander it on meaningless projects. The Oz economy will lose decades to a general malaise, worse than Japan because the Japanese actually have a high tech economy.

        Meanwhile, while the middle class is wrecked (the true price), asset markets will have a wild ride as the 1% get a free pass.

        It doesn’t HAVE to turn out this way, but it’s what has already been demonstrated by the US, Europe and Japan. Can’t see why it’d be different here.

      • they’ll bury it all somewhere (NAB), pile the plebs/specufesters/serfs in & around it – then lock ’em in Northern Rock style debt slavery.

      • Thanks Med, however I believe you’re missing the step where the bonds backing the RBA’s instant cash splash creates absolutely no interest in global bond markets forcing liquidity issues which spill over into the goods Import market. This will probably translate into real material/ product shortages at the Retail/Wholesale level because Aussies sim[ply can’t afford the imported inflation that comes with a significantly devalued dollar.
        This situation is hard to imagine in Australia but it’s rather common place in Argentina

        That said I’m not convinced that mining export prices (aka terms of trade) won’t rescue us from our own RE induced melancholy.

  5. Well like the Muppet show, each of the presenters showed their facts
    What is needed now is someone like Jeremy Clarkson, to sum it up
    “Well the punters have been encouraged to drink at the corporate pool of cool aid,
    Until they are at near bursting
    Now the cool aid has near run out and its time to pay it back,
    And of course it is not there.( the punters just dont have the readies)
    Now some may think this is all about the money?
    But in reality its all about suppression of the common punter.
    As the corporate move to divvy up all the assets they wish for
    This in fact has been a civil war against the punter,
    where the punter was lured into the trap
    Knowingly.

    • DefinitelyNotTheHorribleScottMorrisonPM

      The fact that anyone would think they should be able to buy a house for less than 3 million dollars. Lefty Labour lunacy!

    • Sydney still only has 30% more properties for sale than Perth, it use to be almost the same. What will they say when the Sydney numbers reach the same ‘percentage on market’ as Perth.

    • TailorTrashMEMBER

      “I guess everyone’s worried, especially people who are selling,” he said.
      ……….looks like smug has left the building ………

      • Mining BoganMEMBER

        The smug is in Mr IQ gear. Hmmm…

        Anyhow, the Tuckers. I wonder how much they’ve ‘lost’ because they didn’t want to give away their ‘gain’. Hopefully a lot.

      • exactly, if they don’t want to give it away now they will have to give it away for even less in the future.

      • I know of quite a few BB in Melbourne who planned on selling 12 months ago. Now the market has dropped they are talking about holding on until it turns around. This could put a big dint in all of their retirement plans lol

    • The Chilli Peppers had it right in 91.

      Give it away give it away give it away now
      Give it away give it away give it away now
      Give it away give it away give it away now
      I can’t tell if I’m a kingpin or a pauper

      Greedy little people in a sea of distress
      Keep your more to receive your less
      Unimpressed by material excess
      Love is free love me say hell yes

      I’m a low brow but I rock a little know how
      No time for the piggies or the hoosegow
      Get smart get down with the pow wow
      Never been a better time than right now

    • The headlines a beaut,

      “There are more properties on the market now than at any time since 2012 — and no-one’s buying”

      But I specially like this line : “More than 83 per cent of all properties in Sydney have been on the market for more than 60 days”

      Property market does climate change.

    • “We’ve actually recently bought a property elsewhere. And we need to offload this one to just take a bit of the pressure off.”

      “We have had some serious offers since then but unfortunately they fell through.”

      Absolute gold.

      • I love how they use the typical aussie diminutives… “a little… a bit… just a smidge” … Yeah, nah!… How about “a whole whoppin’ lot” f*ckers?

  6. Jumping jack flash

    Too much non-productive debt can’t be repaid without sucking additional money out of the economy.
    How else is it to be paid? Through everyone’s increased wages?
    Through our meteoric GDP?
    Through our robust export manufacturing?
    Tourism?
    Education?
    The population ponzi?
    Selling our debt to China?

    I think some people focus too much on the dynamics of the banks rather than the dynamics of the people who actually form the economy. It is an easy mistake because the bankers run the economy, but they aren’t THE economy.

    Never forget that businesses, including the private banks, are simply collections of people, all with their own agendas – to repay their gargantuan debts and keep up with living costs, and to hell with everyone else.

    You need to take the sum of all people to see what is actually going to happen.

    • GDP is meteoric…. because just like a meteorite there is a big flash, and when that fades all that is left is a massive crater.

  7. Didn’t ScoMo introduce that bail- in legislation one Friday arvo last year with very little media comment? A few SFR’s I have lunch with, pretty conservative types, are ready to bail out of their TD’s before they’re bailed in. Some of the bags will be quite big. Interesting times.

    • I am shifting what is left of my cash at Big 4 and subsidiaries into the bigger credit unions and mutual banks.

    • It was great to find out about the potential bail-in risk 7 months ago. I thought – why take any unnecessary risk? My TDs are now offshore in much safer places. Thank you MB & DFA.

      • Graham – much of the western world appears heading for economic disaster (with all that follows). So good luck with those ‘safer places’..hope they are!

    • It was started by Rudd in 2013, and with 7 senators present they passed it early 2018. So if the banks do fail and your lucky to have over 250k they’ll skim off that bit for you. After the crash and we’re getting back to health again they won’t give it back. Funny in looking this up I found a post from Ken Henry at NAB saying he’d pass on the failure to the customers and the stock holders. Good old honest Ken.

      • I just wonder how sound is the ‘guarantee’ on accounts up to $250K? If there’s a major banking collapse all bets will be off. Of course we can trust the pollies & bankers to do the right thing by the public, can’t we? At that point the govt will face civil insurrection. Venezuela, like Argentina was a quite wealthy & civilised country before the mad Marxists took over so we have a template.

    • I have to admit, while I have strong opinions on many things, I’m on the fence regarding whether bail-ins would be implemented. At this point we are talking balances in excess of $250,000 (albeit that threshold could change i.e. lower).

      The issue I have is that, in order to execute a bail-in, you would necessarily wipe out the entire junior part of the cap structure (including common stock holders) and as the Big 4 banks are very widely held by the country’s citizens in their Super funds, it would be political suicide to wipe out such a significant chunk of people’s retirement savings.

      The line of least resistance is for the Govt to borrow the money and recapitalise the banks (assuming that option is even available, in the context of what that would do to the sovereign rating etc). I guess, failing that, a bail-in might be the only option. In the end, I suppose the scale of the crisis will ultimately determine what happens. Interesting times.

  8. I know you did peachy. You’re probably in public housing on d’ pension so no worries for you, d’ gubermunt will take care of you. Till they don’t.

  9. Little bit of anecdata from here in bankok… developers of units are rushing to offload stock before the new lvr rules kick in here. Not sure exactly what they were previously, but it will remain the same for first home owners/investors @ 0 percent down. 10 percent for 2nd mortgage if serviced for over 3 Years, 20 percent if serviced for less than 3 years, 30 percent down for third mortgage.

    Global credit impulse driving global recession… was a bit blown away reading about the synchronicity of it all. Bankok post b8 25th Feb 2019

    • Yep. The Fed tried to shrink its book. US bonds are the engine of the international shadow banking system so raising rates / yields leads to rehypothecation chains collapsing and killing credit all over the globe. Everything moves as one these days. Somewhat “good” news for the RBA because the pressure is off now for it to raise rates.

      • I remember scratching my head years ago, in the north of Thailand. Proper middle of nowhere, family with a house literally made with sticks and leaves, brand new Hilux parked outside, and I thought to myself…something ain’t quite right here. How can these folk afford this?

      • Mining BoganMEMBER

        Probably bought by one of my fellow bogans seeking permission to continue to see their daughter.

    • You get an innate sense of what would happen in the event of a synchronised global recession — a meltdown of epic proportions. In the past, the business cycles of the various countries were staggered so there were always a number of countries around to do some heavy lifting while others got through their slump. Added to which, there was always sufficient monetary fuel. Not this time ..

    • Ah, good old extend-and-pretend. If you keep papering over the chasm, eventually you find some solid support.

      So BBSWopalypse averted? How are those 50bps of our of cycle rate rises working out for yas? Ahahahhahaha!

  10. Land was not made by humanity and its value is created by the entire community not the owner. Letting the owner pocket profit is theft from the Creation, the community and future generations. Collect the annual rental-value of sites in lieu of all taxation. This is payment for a service supplied (exclusive monopoly), not a tax. Land price should fall to zero. Cadastral sites should transfer for value of improvements only. Let the banks collapse as their ‘securities’ evaporate; form local credit unions instead.

    Fiat currency is OK but must be pegged to a commodity. Standard house bricks are best (always useful and can’t be carted out of jurisdiction). Gold is useless.

    We need a total depression & currency hyperinflation to flush the toilet so scales of delusion fall and the pollies + plebs alike hear sense.