For the past few years I have had in mind a double dip scenario for property prices. Such as it was, the thesis ran that the extraordinary headwinds that hit property after 2016 would drive prices down so sharply that the RBA would be forced to slash interest rates much more than anybody expected. That, in turn, would trigger a price recovery of sorts.
But, said rebound would be weak owing to the central bank running out of ammunition. And because we were, and are, clearly at the wrong end of the business cycle, there was a material risk of an external shock landing on a still weak property market and finding the RBA naked.
Moreover, the thesis ran, even if the business cycle bumbled through, Chinese growth is grinding lower at a pace that means bulk commodities prices will resume their crash into the early 2020s and that income shock would roll weak house prices over again as fiscal policy was also constrained just at the wrong moment. So it was something of a double bet.
