Money Minute – April 12 2017 “Careful What You Wish For”
Ross Greenwood: Good morning to you all.
Listen, are you one of those people who bemoans Chinese investment in Australia? Who grumbles about people with Asian faces, even if there Aussies, bidding at auctions pushing up property prices?
Now, if you are one of those… hope like hell that China keeps investing, because if they stop then we’re in really big trouble.
A report today by one of Australia’s leading economists, Deloitte’s Dr. Chris Richardson, will observe that if China’s economy slows, our unemployment rate will soar; house prices across the board will drop by nine percent; and it’ll wipe out a thousand billion dollars worth of wealth – most of it in property prices.
A thousand billion by the way is a trillion dollars.
To put that in perspective, it’s around half the total in superannuation right now.
That’s how much, according to Chris Richardson, we do not want China to slow down.
Now with the downturns bad, Richardson says the federal budget and government debt will blow out by $40 billion in just two years.
Now consider the government already has $330 billion worth of debt, well if it rises rapidly it will keep on going if China slows.
Now a couple of things here, Richardson’s not saying China will fall anytime soon – far from it.
But he’s warning that Australians are living in a fantasy land by allowing government not to cut the budget.
He’s line: “we’re out of ammunition to withstand a downturn caused by China”
Well, because government debts risen so fast and Australian households are now the second most indebted in the developed world.
That means many of us are not well equipped if rates rise suddenly, if unemployment takes off, or if the national economy folders – say because of China.
So if you had an auction and see an Asian buyer, or any buyer for that matter, is paying over the odds for a property… let them go!
If things turn bad that property, most likely, will end up on the market again- at a cheaper price.
Remember the old saying, ‘buy in gloom, sell in boom’… it’s today as true as ever before.
Quick look at the markets now, and what we can see… the dollar just below 75 US cents.
We move further forward, the gold price $1274.
The Dow Jones index of US shares down by six points.
Time, now, for entertainment news with Richard Wilkins.