"Rocky times ahead" for Oz economy
May 9th 2005, 10:20 pm
#1
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"Rocky times ahead" for Oz economy
Here are some extracts from The World Today on Radio National - http://www.abc.net.au/worldtoday/con...5/s1363128.htm - with Eleanor Hall talking to the ABC Finance Correspondent, Stephen Long.
ELEANOR HALL: Well I guess also fitting the pattern is the investment bank, JP Morgan's research today predicting a 10 per cent fall in house prices. It's quite a significant number. What's their reasoning?
STEPHEN LONG: ... it's basically a demand-supply equation. JP Morgan estimates that demand for housing can absorb 155,000 dwellings a year, but over the past three years, there's been an average of 170,000 new housing starts, pretty much a glut on the market.
ELEANOR HALL: And if that prediction of a house price fall is right, how will that hit the economy?
STEPHEN LONG: Well, three quarters of the jobs in the economy flow directly or indirectly from the housing sector.
ELEANOR HALL: That's enormous, isn't it?
STEPHEN LONG: It is, and that's why some of the focus on the skill shortages has been, some would say, a little bit misleading because the main skill shortages that we've seen, they have been in construction, but we've got a slowing construction sector now. Mainly, however, in mining and manufacturing. What we're seeing now is we're seeing a big slowdown, and I've been told reliably that a lot of the big construction firms are really looking at very, very shaky profits, some of the mid-level subcontractors are in big trouble. In the retail trade area, you've got high volumes of retail trade, but prices coming down because of competition, that's hitting the mid-tier retailers and the small retailers, small retailers try to break their leases.
So we've already got a significant slowing in the areas of the economy that bounce from housing. If house prices come off by a further 10 per cent, people will pull back more on spending because houses are people's biggest asset.
What we've already seen, as soon as you saw a slump in the housing market, Australia's debt-laden consumers started to pull back on spending. If they pull back further, it can really add to the momentum of the downturn.
ELEANOR HALL: You mentioned the stench of recession. Your call on that?
STEPHEN LONG: Oh, I'm too timid to make a call, but I think that we're really facing rocky times ahead.
ELEANOR HALL: Well I guess also fitting the pattern is the investment bank, JP Morgan's research today predicting a 10 per cent fall in house prices. It's quite a significant number. What's their reasoning?
STEPHEN LONG: ... it's basically a demand-supply equation. JP Morgan estimates that demand for housing can absorb 155,000 dwellings a year, but over the past three years, there's been an average of 170,000 new housing starts, pretty much a glut on the market.
ELEANOR HALL: And if that prediction of a house price fall is right, how will that hit the economy?
STEPHEN LONG: Well, three quarters of the jobs in the economy flow directly or indirectly from the housing sector.
ELEANOR HALL: That's enormous, isn't it?
STEPHEN LONG: It is, and that's why some of the focus on the skill shortages has been, some would say, a little bit misleading because the main skill shortages that we've seen, they have been in construction, but we've got a slowing construction sector now. Mainly, however, in mining and manufacturing. What we're seeing now is we're seeing a big slowdown, and I've been told reliably that a lot of the big construction firms are really looking at very, very shaky profits, some of the mid-level subcontractors are in big trouble. In the retail trade area, you've got high volumes of retail trade, but prices coming down because of competition, that's hitting the mid-tier retailers and the small retailers, small retailers try to break their leases.
So we've already got a significant slowing in the areas of the economy that bounce from housing. If house prices come off by a further 10 per cent, people will pull back more on spending because houses are people's biggest asset.
What we've already seen, as soon as you saw a slump in the housing market, Australia's debt-laden consumers started to pull back on spending. If they pull back further, it can really add to the momentum of the downturn.
ELEANOR HALL: You mentioned the stench of recession. Your call on that?
STEPHEN LONG: Oh, I'm too timid to make a call, but I think that we're really facing rocky times ahead.
May 9th 2005, 10:46 pm
#2
Happy Daddy
Joined: Aug 2003
Location: Dodgey West Midlands , UK
Posts: 1,312
Re: "Rocky times ahead" for Oz economy
Hiya sackofspuds,
that's why they wont all the migrants to keep the housing market boyant.
I heard someone on TV mention The R word in relation to the UK.
Bye
Mark
that's why they wont all the migrants to keep the housing market boyant.
I heard someone on TV mention The R word in relation to the UK.
Bye
Mark
May 9th 2005, 11:47 pm
#3
Guest
Posts: n/a
Re: "Rocky times ahead" for Oz economy
Also said by:
STEPHEN LONG:
There are some who are smelling the stench of recession in the air, but most think that we're heading for a soft landing.
STEPHEN LONG:
There are some who are smelling the stench of recession in the air, but most think that we're heading for a soft landing.
