Construction and retail will hurt the most. The 'wealth effect' comes into play as well. Most stocks will get smashed if Australia has a nasty recession. Either directly and/or through negative sentiment on market. The biggest anyone should do is pay off a margin loan if they have one. Thats really the only defence you need if youre diversified.
At the moment prices are falling and lending standards are improving in Syd and Melb. I think there would have to be a very significant external event to cause the unemployment which would result in a 'crash' eg. 20-30% in a year or 18months
At the moment we are on track for 10-15% over next couple years, with Syd already down 5% since mid last year. The 'soft landing' is in play at the moment, there isn't a whole lot of commentary pointing to a global recession anytime soon, particularily in China.
Though it's always the crisis you don't plan for, right?
I think the most plausible outcome is for housing to come off up to 20% over next fews years by way of price falls and inflation. This will cause very low growth in Aus as consumer sentiment will be hurting, but all that matters is the interest is paid, and funding costs are still going to be historically very low.
Remember its the forced selling and extrememly loose lending that crashes a housing market, not 5.5% unemployment, a banking inquiry and record population growth!
Careful of the Roger Montgomery types. He just needs to right one year and thats what people will remember, great publicity for his fund to have a very negative view on everything, especially housing. No one will care to look and see he has been saying the same thing since 2014.
