Interest Rates - Commentators and Economists Change Their Tune on Australian Recovery
I'm not quite ready to say i told you so. But i am feeling just a little vindicated by my previous predictions of an economic recovery in Australia sooner than expected by nearly every commentator or economist.
After consistent rises on the stock exchange, housing markets in a boom and lower than anticipated unemployment, the economists are starting to amend their positions. That's not a big surprise. An economist's position on anything can change as often as Melbourne's weather.
It didn't take them long to change their tune. Just a couple of months ago, predictions were for a worsening economic climate, with talk of more cuts in interest rates and unemployment to hit 10%. And the same commentators scoffed at the Treasury growth forecasts contained in the Rudd Budget. It was wildly optimistic they said.
Take Access Economics and Chris Richardson as an example. Earlier this year Richardson and his pay for opinion service was tipping unemployment to reach up to 10%. A month or so later, they revised down their forecast to about 8%. Just last week, Richardson and his team of spinmeisters amended their prediction yet again - unemployment to peak at around 7.5% and an economic recovery later this year. Does anyone in the media question their constant opinion changes? Of course not.
Now I will say "economic recovery" with a big grain of salt. Ive said previously that Australia was in a Claytons Recession. To "recover" actually suggests that we have had a tough time since the global financial crisis hit. We haven't. Take the newly unemployed and those about to retire out of the equation, and i would suggest that Australia has never been in a better economic position.
But there are problems on the horizon for the Australian economy. Its something Ive been rabbiting on about for months. And its called the Inflation Genie. We have all of that extra money in our pockets from government handouts and lower interest payments. No, not all of it has been spent. When it does get spent domestically, it will compound the inflation problem. The RBA has already signalled that it will be looking towards managing the expected problem with inflation soon.
And that means one thing for you out there in mortgage land. Higher interest rates. Ive long predicted that interest rates in Australia will start to rise in March of 2010. I may be slightly off in my assessment. It could actually be earlier than that - in the last couple of months of 2009. Believe it. The RBA wont be reluctant to use monetary policy to cool a possibly overheating economy.
What will come with that is some problems for those who have used the lowest interest rates in 50 years to borrow more than they can afford. They have been allowed to do this by banks and mortgage brokers too willing to throw money at the residential housing sector.
Its our own mini sub prime crisis of course. Which is one of the reasons that Australia's housing market will actually defy the trend of the rest of the world. Our property market will experience a price drop in the not too distant future. Ironic isn't it? While the US and Europe housing market recovers, Australia's will crash.
But the rest of the Australian economy need not worry. China is doing incredibly well and our commodity exports will again keep us pumping along quite nicely. Unemployment is unlikely to hit much more than 7% and wages will remain high. And we will just go back to living the life we have become accustomed to in the last decade.
Lessons learned? None.
Families under financial pressure? Where?
Anyone see that UFO?
About Just Grumpy
0 comments
Post a Comment