Peter Verwer |
Thursday, 1 May 2008 1:00 PM |
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Now it’s serious. Supermodels are refusing payment in Greenbacks and mafia bosses are hedging in Euros.
The world’s richest model, Giselle Bündchen, says the US dollar is no longer the globe’s reserve currency and the US economy is tumbling off the catwalk.
With a haughty sideways glance at fashionable de-coupling theorists who contend the world no longer rides on America’s couture tails, Giselle joins Warren Buffet, George Soros and hedge fund managers in dumping the dollar.
They're not alone. Jim Rogers, the legendary commodities trader and former Soros business partner, is even fl ogging his house and US currency possessions to buy China’s Yuan. Rogers said, “I’m moving to Asia because moving to Asia now is like moving to New York in 1907 or London in 1807.
It’s the wave of the future.’’ It’s simply unfashionable to be optimistic about the US or the world’s economic outlook. Critics accuse the investment crisis – deniers on Wall Street of being NIMPs – “Not In My Portfolio ”.
They argue there’s much worse to come and depict swelling waves of global fi nancial pain. They say a US credit crunch will lead to a consumer spending crisis spurred by worsening negative home equity, followed by declining asset values and investment, lower productivity, job losses and an economic shame spiral that engulfs the world.
It’s a pretty convincing theory really, what with the UK on the (Northern) rocks, Europe patchy, Japan back in the doldrums and even a handful of other Asian economies, such as Singapore and Malaysia, looking soft.
The saviours are meant to be China and India, which continue to motor along at a slightly reduced rate of economic growth. China, in particular, is no longer as reliant on its exports to the US and seems set to maintain its voracious appetite for Australian raw materials (and, increasingly, our services). Australian property commentators might also be accused of NIMPism.
They talk of a distinction between the capital markets and the `real markets’, arguing that the crash in listed property prices doesn’t refl ect the strength of the underlying property economy.
And they’re correct in pointing to the 25-year low in offi ce vacancies, the stable consumer spending in shopping centres and jauntily high hotel occupancy rates. Not to mention a booming Western Australia, a strong-ish Queensland and South Australia, which is on the cusp of becoming the Wild South thanks to its emerging minerals boom.
The consensus is that we’ll see some yield decompression in secondary markets, but that prime assets are prime assets and there’s still plenty of money to maintain prices during a few inevitable fi re sales.
Indeed, there’s much talk of once-in-a-cycle opportunities for picking up entire portfolios with a bout of M&A activity in the offing.
All of which seems reasonable, but misses the point. We haven’t begun to see the real pain wash onto our shores. When the world slows down, Australia goes along for the ride.
The difference between 3.5 percent average annual economic growth and 2.5 percent growth is massive. Harry S. Truman remarked that it’s a recession when your neighbour loses their job and a depression when you lose your own.
These days we might say that it’s a recession when your colleague doesn’t get a bonus and a depression when yours disappears.
An economy built on 18 years of growth doesn’t need a technical recession to induce pain, especially as most workers under 40 have never seen a fully-blown slowdown.
For the Property Council, this means our agenda will re-focus on property fundamentals – the new black. It also means further boosting our political activism.
The vulnerabilities of the Australian economy call for more radical action on the nation building, single markets, tax reform, red tape cutting and urban policy fronts.
That’s why we’ve welcomed the Rudd Government’s 2020 Summit outcomes, many of which reinforce our key messages of the past 10 years.
The Property Council is in the business of energising policy debates that lead to reform. The 2020 Summit has made public policy discussion trendy. Like nerf balls, dingbats, foosball and iPhones, every kid on the block will soon want their own 2020 platforms. The property industry is ready for the policy ideas vogue. Maybe Giselle will help us with the policy launch.
Peter Verwer |
Thursday, 1 May 2008 1:00 PM |
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