Shareswatch Australia

Over the last few months it has been quite remarkable to witness how the believers in Ken Henry’s ‘Golden Age’ have started to sound a little downbeat as the economic slowdown in China can no longer be ignored.  Therefore it seems like an appropriate time to try and assess what impact this slowdown is having (and may have) on the Australian economy and review the charts for a few important economic indicators.

Last year when I dared to suggest that the Australian economy was unbalanced and that 2011-2012 could be a period of economic contraction the mainstream financial reporters were churning out “miracle” economy stories. Back then they were obsessed with telling their readers how the mining boom would shower riches across the Great Southern Land, but today many of them have started to sound a lot more cautious.

Back in April last year I suggested that the Australian economy was not quite as robust as most market commentators appeared to think and that it was quite possible for economic conditions to deteriorate quite markedly over the next few years.  So now one year later after I wrote about a possible economic slump in Australia let’s have a look at how events have unfolded since then.

Often lost in the debate about house and home prices in Australia is the discussion regarding if our national obsession with housing is good or bad for the overall economy.  Instead of rejoicing that residential real estate prices in Australia rose during the global financial crisis, maybe we should be looking a little closer at why prices are rising to see what problems this might be causing.

As the year has progressed I have noticed that my view of the Australian stock market and economy has become increasingly at odds with most of the mainstream market commentators back in Australia.  Whereas they see reasons to be optimistic and feel the economy is robust, I feel the situation is quite different and believe the Australian economy is dangerously unbalanced and possibly primed for a nasty correction.

Over the last few weeks most of the financial media have once again managed to draw the wrong conclusions on a range of issues from Australian dollar to the strength of the Australian economy.  Talk of the so called two speed economy seems to be back in vogue whereas I believe we should be focused on and worried by, the unbalanced nature of the Australian economy.

Stock markets around the world have had a very volatile run over the last few weeks with everything from debt levels in Europe to housing statistics in the U.S.  giving scaring investors. But during times of market volatility it is important to try and spot the longer term market trends and not get carried away by sensational headlines or daily market swings.

A discussion about the Australian residential real estate market, home prices and the property market based on articles that were posted & discussed previously.

If you are an investor and you have not contemplated an economic slump in Australia during the next few years then in my view, you might be in for a nasty surprise. Yes the Australian economy did hold up well during the worst of global financial crisis, but the crisis isn’t over yet and it still has some sting left in it’s tail. (just ask the people of Greece!)

Back in the 2008/2009 when home prices in parts of Europe and the United States were tumbling there were plenty of “experts” saying Australian house prices would also come crashing down. But alas the residential property market remained fairly robust during the global financial crisis and the experts who predicted a crash in property prices were wrong.

One of the most discussed economic topics at the moment in Australia is regarding whether real estate prices are about to plunge across the nation or if Australian residential property will generally be spared from the savage price falls seen in the U.S. and the U.K.  Rather than take sides in this debate, I will merely outline some of the arguments being tossed around in newspapers, online forums and blogs etc. and see how well they hold up to scrutiny.