The U.S and many major EU economies have an awful lot of debt to pay off and I would imagine consumption in these nations will remain subdued for while..maybe China can make up the gap, maybe not.

There does seem to be quite a few tales of overbuilding coming out of China so it will be interesting to see what happens after the World Expo in Shanghai. The Baltic Dry Index for example is nowhere near the highs of 2007 and has yet to recover from plunge after the Lehman Brothers debacle.

This suggests to me that world trade is not that robust and I reckon commodities prices might fall, not rise later this year.
If that were to happen I reckon the RBA and Government would slip into panic mode!

As predicted last October with the steep rise in migration for 2009 this has pushed pockets of the Sydney and Melbourne into a boom with expats,migrants,investors and foreign purchasers creating a rise in prices.

Sadly I don’t personally believe this mini boom is sustainable unless China is able to continue its growth rates. However I have been told from a reliable source that the middle class in China is emerging and will require the resources of this Country and many others to supply their growth . If USA can recover then we are headed for world recovery and I believe if you look around wether its the Stock market or Real Estate Market the increases are really only returning to the previous peaks . The real question is what happens when all markets breach the old levels …in effect there is no boom just a realignment of the companies and countries that have survived and monopolized markets by market share thus strengthening their positions .

For the record I am sticking with what I wrote back in September 2009 in terms of the global economy, the stock market and house prices. Nothing I have seen so far makes me inclined to change my mind.

The Yanks do remain a huge wildcard in the deck though? Depends if going quietly is part of their game plan – With the indications being definitely not! …

As for the long term outlook for housing it is hard to see how prices could fall, but maybe if we saw a long term decline in the value of our exports then maybe that would cause some grief?

You did a good job on calling the start of this recent stock market correction.

I can’t help but get a little nervous though as I see residential property prices still heading up. Are people really that confident about Australia’s economic outlook?

Has all the talk about China and the commodities boom convinced people that Australia is an economic fortress?

Houses have defintely gone up as you say – I try not to have an opinion on what they’ll do anymore!

I am actually getting a touch nervous about property prices..they still seem to be creeping up.

The retail sales figures after Christmas will be a very interesting read I think. It should give a good indication of how people are holding up on a personal level as well as how small business are going and if they are able to keep their heads above the water.

It is a bit humourous to see a Brit financial reporter pointing his finger at Japan – If I was him I think I’d be hoping Japan holds up real well on the assumption that when Brittain has to trundle off to the IMF for a handout, the fewer in the queue the better!

Seems that there could be a disconnect between big business and small business in Oz at the moment with policy makers preferring to focus on the future happy prospects for big business. The hope being that feeds into small business in 2010 I guess. :

http://www.smh.com.au/business/small-business-big-trouble-20091205-kb9u.html

And NAB has said they expect a 5% house price correction next year. Wonder why they’d talk house prices down? The RBA coming out and saying house prices are sustainable after maybe 7 years of saying they fear a bubble could form “in the future” is a bit wierd too. If one was even a little bit cynical he could be tempted to think NAB was trying to assure people that any drop in prices would only be small. And ditto from the RBA.

The Fed could be right about it taking 5 years or more for the U.S. to recover from the GFC fallout if it fact the nation ever recovers. Perhaps the U.S. will need to deal with their own “lost decade”?

A lot can change in 5-10 years and I believe Asia in general will do better Europe & the U.S over that time frame. People in the older developed economies believe they have a right to a high standard of living, hundreds of millions in people across Asia know they will have to work for it.

http://au.news.yahoo.com/thewest/business/a/-/world/6513153/fed-sees-slow-us-recovery/

This bloke doesn’t seem to warm to Japan’s prospects too much at all – “Japan is drifting helplessly towards a dramatic fiscal crisis” blah, blah, blah …

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6480289/It-is-Japan-we-should-be-worrying-about-not-America.html

That mightn’t be at all nice for Oz!

Although Japan’s recent recommitment to QE seems to have made him tame down his assessment a bit? :

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6703032/Japan-steps-up-quantitative-easing-to-fight-deflation.html

The strong yen is hurting the Japanese economy at the moment and so until something happens in that area I would guess the Nikkei will keep struggling. But overall I am fairly optimistic about the long term outlook for Japan Inc.

As each day passes, it’s obvious that Australian property is a dead man walking. Right now, we’ve got interest rates increasing (up 0.25 again today) and banks supposedly tightening credit. All that’s in favour of higher house prices is government handouts and expectations of future price increases.

The more I think of it, the most I come to the conclusion that availability of credit is the key. With credit being tightened up (through interest rates and banks increasing LVRs), the ability to pay ever increasing prices has to be diminishing. But wages aren’t keeping up. Yes, we have rampant migration, but how can they keep pushing prices up if they can’t get loans? If banks don’t keep pushing loose credit, who is going to have the money to pay higher prices? The only way house prices can keep going up is if banks go subprime. Or if Rudd keeps up with the handouts.

I reckon the gov’t is in a serious bind right now. They are cutting back non-essential stimulus, such as the pink batts. That got reduced by $400 the other day. And then some school spending has been deferred. So money is tight. But you can be sure that the FHOG boost will be the last stimulus to be cut. If too many people squeal about higher interest rates, does K Rudd come out and stimulate some more to ease the pain? I think there is limited room for Goose and K Rudd to shower us with cash to make all these troubles go away. In short, times are getting interesting.

As for Biker’s predictions, well he’d be right but for the wrong reasons.

Property is a good investment. But we all realise that property is in a bubble right now – and those prices are not realistic at all.

That makes it a poor investment currently, unless you love high risk and debt.

We all know what fuels the the property bubble. The natural supposition is that when the artificial fuel runs out, the property fire will die down to the level it is sustainable at.

Essentially what we end up arguing about is the fuel, be it the new found heightened immigration, a FHOG boost, taxation incentives, artificially low rates, property spruiking, etc.

So we second-guess the Government, wondering what new fuel it will put into the bubble. Meanwhile, global storm-clouds are gathering.

To suggest that people are ‘right’ simply because house prices didn’t fall doesn’t seem correct to me. If a person predicted the actual reason(s) why they don’t fall (eg, increased FHOG), perhaps even merely saying “Government stimulus”, then that is fair enough.

But to say property won’t fall, because it didn’t in the last 10 years…is completely pointless.

You could think of it like this:
If I predict right now that the RBA will keep raising interest rates forever, I can claim that I am right for as long as that lasts. My reasoning may be completely flawed, but I am still technically right.

On that point, would I necessarily have an ‘insight’ into the system? No.

And all it would take is a single time whereby the RBA cuts rates, and I am no longer the ‘rate guru’. Luck and bull$h1t springs to mind. Much better off discussing why the RBA may/may not raise rates on each occassion and consider the economic conditions that may affect the RBA’s decisions.

It is also fallacious thinking, such as:
Property ‘experts’ say property prices will not fall. Person says property prices will not fall. Property prices do not fall. Therefore person is a property ‘expert’.

I don’t particularly like ‘experts’. To me, expert=bias. (technical experts being the exception). This was particularly confirmed when yesterday I met Antal Fekete