Economic snippets, November 2018

RBA bullish on economy, rates unchanged, 6/11

Strong GDP growth, sluggish wages growth, stubbornly low consumer inflation, house prices falling, share prices volatile. Cash interest rates on hold, some now saying until 2020.

Consumer debt of Australians the highest in the world. 'No probs' says our central bank, 'the debt is mostly owned by people who will not wince as prices fall and cash interest rates rise', a rough translation of expert opinion . My own worry is what happens when the next downturn hits and the budgets of governments are barely balanced, cash interest rates are still 1.5 %, with little room to be reduced and household debt is still rising from excessive levels.

An American expert about to visit our shores says we will be hard hit when the great global asset crash arrives. 'Twenty-five years without a recession (actually 27) said guru opines, the Aussies won't know what hit 'em. Asset prices always rise too far in the booms, and fall past the theoretical balance point when they fall. Write Australian house prices in for a 50 % price fall'. Ouch!

The image below from the USA can be applied to Australia. The shepherd represents the old lady of Martin Place, we the punters are the sheep. The crook symbolises the uncertainty that must nag Dr Lowe when he awakes at night.