Are we really heading for GFC Mark II?
Well, not here in Australia anyway! And even overseas, things are vastly different this time around.
In 2008/09, it was private debt causing the problems … because nobody was too sure which banks were overly exposed to the sub-prime mortgage problem.
As a result, banks would no longer lend to other banks — thereby causing a credit squeeze. Whereas, this time around, the issue relates to public debt. And as all the parties know one another, an orderly bailout/deferral arrangement is more likely to occur.
Australia’s Position in all of this …
The RBA is adopting a cautious line at present — where this chart will provide you with the various pros and cons behind its most recent decision to keep rates on hold.
But irrespective of what happens overseas, Australia has one vital factor in its northern neighbours lack … FLEXIBILITY with its fiscal and monetary policy.
Most US, UK and European interest rates are currently hovering at or near zero. And unlike them, Australia currently has a looming shortage (not an oversupply) of Officers and new homes.
With the present uncertainty, Australia’s high currency serves to curb inflationary pressures at home.
However, were our dollar to return to previous levels at around US80 cents … then this would provide a welcome boost to our farming and export sectors.
Furthermore, our sovereign debt is the lowest of all major countries (other than China). Therefore, if needed, the government can immediately undertake any fiscal stimulus that may be required.
Bottom Line: While you cannot simply ignore all the upheaval in the northern hemisphere … equally, you ought not allow yourself to become overly stressed by it either.
Right now, opportunities abound with Commercial property for those able to read the strong underlying signs of a market poised ready to take off.
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