"We are not in a property bubble"

[Aceyducey]

Originally posted by Peter 147
Is it when unemployment gets this low it triggers it by wages blow out, lack of workers?
Can anyone comment on this aspect as recessions cause busts?

Peter,

It looks like wages growth is under control this cycle.

Bear in mind that inflation is very low & economic growth quite high compared to the times you mention.

Also the world situation is on the improve, which also helps.

Recessions don't cause busts, people do

Cheers,

Aceyducey

 

[MarkB]

Peter

Certainly rising unemployment is one signal of a downturn in the economy, and downturns can lead to recessions.

But, to say that a "low" unemployment rate, such as was the case from 1978 - 1981 (about 6% or just less) or 1989 (less than 6%) is a automatically a precursor to a recession is not a statement that I would be prepared to make.

I believe that there first needs to be some other factor, a shock if you like, that brings on a downturn.

Once a downturn starts, if this manifests itself in rising unemployment (as it usually does), then of course this only adds to the problem. However, my point is that there needs to be a catalyst before this can occur.

As to what that is?

MB

 

[Peter 14.7]

So what are the risks

Dear Pitt St (cool name)

I agree it would appear rsing unemployment is not an issue but what do you think are possible risks?

Shortage of Workers forsing rising Wage Rates?
A reversal is the $A dollar against the US fueling inflation?

 

[Peter 14.7]

Posted early

Must be tired accidentally sent post before completion.

Other factors,

Continued boom in property?
Removal of affordable Bank Finance?


Any thoughts any one?

Peter 147

 

[Aceyducey]

Re: Posted early

Originally posted by Peter 147
Any thoughts any one?

The key risks I see right now are mostly external to Australia:

A global downturn (which we are now more vulnerable to with our higher rates & farmers requiring a good year or two to recover)

US dollar continuing to fall dramatically (forcing our dollar higher & hurting exporters)

Major changes in global energy market (rise in prices)

Major changes in global primary products markets (decline in prices)

Further terrorist activity on a major scale

A hot & less lopsided war involving Australian allies/major global economies (ie: action by China/Russia against a sovereign nation or semi-sovereign such as Taiwan where the US intervenes....or vice versa)


I don't really see any locally-led factors which could cause a major downturn right now.....maybe if Labour won the next election and pursued a 'new broom' strategy diligently there would be some pain - or if we had a few more major corporate collapses.

Maybe if the drought worsened further & continued for a few more years...but that's a further out risk.


But then - I tend to always see abundance! There are ALWAYS great opportunities about....never more so than in a faltering economy

Cheers,

Aceyducey

 

[Peter 14.7]

Dear Acey

Good feedback. It would agree, it would appear our greatest threat is abroad. And from the last 3 years we all know any and all things can happen!

Your comment on energy is well timed as here in Sydney they only yesterday floated changes in water charging that will mean increases for wasters/large users. Minor it would see, but as someone intimately involved in commercial property all those cooling towers use a lot of H20 so a flow to business and prices is possible. Small I agree but the first terror attacks by Al Queada were small as well.

Thankfully I believe we live in one of the most blessed nations with a modern economy and benefits of large scale production in food and mining. I guess that highlights many more will want to come and stay and the demand for property with always rise.

Peter 147

 

[de nero]

Originally posted by Aceyducey
Let's see:



Where are the factors likely to cause a property bust?





Aceyducey

What about rising interest rates?

 

[Aceyducey]

Originally posted by de nero
What about rising interest rates?

Do you believe the Reserve Bank wants to cause a bust? Or that the Federal government would let them?

Interest rates are one of the few controls the government can directly manipulate (alongside government spending & legislative controls).

While interest rates are being used to maintain inflation within the 2-3% band they are not likely to cause a bust

There's been a few other good threads on this topic which will give you more information about it.

Cheers,

Aceyducey

 

[MarkB]

I'm on hols at the moment, so deep and meaningful is not exactly the order of the day.

Interest rates, recessions and most anything to do with economics are the last things on my mind as I laze in the sun and cool off in the surf on Angels Beach (don't ya love that name) at East Ballina.

Peter - Acey has answered the question much the same way as I would have. I agree totally that the factors are largely external, barring a domestic terrorist attack (possible effects on the financial sector).

I have also never subscribed to the view that will will see another interest rate inspired recession at any point in the near future.

Take it easy (I know I am).

MB