I'm not saying it will happen in the near future just that i thought it was prudent to reduce my exposure in case it does.
Consumer confidence & business confidence or rather the collapse in it is what causes recessions.
Australian having 5.5% unemployment at this point in the economic cycle is a big red flag as is the fact that the Federal government is still running a deficit.
Australia is in an incredibly poor position to enter a downturn that will happen in the next few years globally even without the ridiculously over priced & overly indebted housing market.
How long do you think people will continue to migrate to Australia when there are no jobs? It's hard enough to get a job in Australia as a migrant now in the current market.
The big problem is that so few people in Australia remember the last recession or have forgotten, complacency is rife.
If the housing market falls 20% & then a global recession hits it'll be a decade before the housing market hits a new peak because Australia will be at the end of the queue to come out of recession rather than dodging one (with luck) like the last one.
How often do you here people whinging about 'high cost of living' etc?
That's because they are over commited to mortgages they can't really afford, just wait until the sh*t hits the fan. The average person has less than 3 weeks in savings in the bank, the recommendation is to have 3 months! No wonder retail is in the doldrums & has been for years.
And there's an awful lots of interest only mortgages that need to be refinanced to repayment mortgages in the next 2 years. It's estimated that about a third of those investors won't be able to afford their new repayments. About 20% of people with interest only mortgages don't even realise they aren't making any capital repayments!
So it's not a matter of if but when IMO that it all goes tits up & when it does it'll be like two recessions in one.
MNY Price at posting:
$1.93 Sentiment: Buy Disclosure: Held
