Is anyone who is bullish on the AUD seeing what is actually happening there. Listening to central bankers is one way to go broke. The house price bubble has now burst. We are hearing all the arguments from estate agents trying to justify that it is now a buyers market etc. Prices are heading south.
Mortgage debt to GDP is now larger in Australia than it was at the peak of the bubble in the US and the UK. Now that prices are falling, there has been an acute drop in demand. All that credit expansion that went into blowing up house prices is going to go into reverse. The asset side of the Oz banks is not going to look pretty 12-24 months from now. The next rate movement is down. The RBA possibly don't know that yet, but they will soon enough.
All the talk from the vested interests about a supply shortage will prove to unfounded. Look at it like this. Lets say your government gave everyone a stimulus cheque to buy a BMW over the next 6 months in your country, a $30,000 cheque. There would probably be a shortage for 6 months. But is there really a shortage? Or is it more a case of an artificial demand/boom story. well the same goes for the OZ real estate bubble. Huge credit expansion has bid up prices, creating an artificial demand, making it appear as if there is a shortage. However,, whether it was in Japan, ireland, the US, the UK, these same arguments were made at the peak, to be proved insubstantial once credit expansion reversed, demand dropped and prices head south, and non-performing loans increased.
Also see this...how do you think OZ will fair when China’s Real-Estate Developers Struggle with Debt; Servicing China's Total Debt Load is Problematic; Dramatic Slowdown in China Coming http://globaleconomicanalysis.blogsp...-struggle.html
The next 2 years is not the time to be long the AUD.
Mortgage debt to GDP is now larger in Australia than it was at the peak of the bubble in the US and the UK. Now that prices are falling, there has been an acute drop in demand. All that credit expansion that went into blowing up house prices is going to go into reverse. The asset side of the Oz banks is not going to look pretty 12-24 months from now. The next rate movement is down. The RBA possibly don't know that yet, but they will soon enough.
All the talk from the vested interests about a supply shortage will prove to unfounded. Look at it like this. Lets say your government gave everyone a stimulus cheque to buy a BMW over the next 6 months in your country, a $30,000 cheque. There would probably be a shortage for 6 months. But is there really a shortage? Or is it more a case of an artificial demand/boom story. well the same goes for the OZ real estate bubble. Huge credit expansion has bid up prices, creating an artificial demand, making it appear as if there is a shortage. However,, whether it was in Japan, ireland, the US, the UK, these same arguments were made at the peak, to be proved insubstantial once credit expansion reversed, demand dropped and prices head south, and non-performing loans increased.
Also see this...how do you think OZ will fair when China’s Real-Estate Developers Struggle with Debt; Servicing China's Total Debt Load is Problematic; Dramatic Slowdown in China Coming http://globaleconomicanalysis.blogsp...-struggle.html
The next 2 years is not the time to be long the AUD.