Biggest Economic Threat For Australia

It might surprise you to hear this, however …

h3. A Strong US Recovery

… would probably be the worst thing to happen for Australia in 2010.

If that occurs, the US Federal Reserve would be forced to quickly raise interest rates, from zero to around 3%. And that would cause the collapse in the Australian dollar from its current level of around US90c.

Up until now, Australia has been shielded from inflationary pressures, with a high dollar holding down the cost of imports.
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Australian Commercial Property is Runnning Its Own Race

Unlike the US and Europe, Australia has not suffered a banking crisis. Therefore, our banking system is still capable of providing credit for normal growth.

With the US unemployment rate approaching 10%, this will delay any quick turnaround for the Commercial property sector.

Decoupling from the US

Decoupling from the US

As you would expect, there is a strong correlation between high unemployment, tenancy contractions and falling commercial property prices. And as a result, a reluctance by banks to provide credit.
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Do You Remember Back Then … ?

In an earlier article, I gave you a bullet-point comparison of how things are NOW … compared to the early 1990s … in relation to Commercial property.

Anyway, here are some very revealing graphs — based upon figures from the RBA.

Now & Then

Now & Then


Back in the 1990s, the banks were burdened with a heavy corporate exposure; and interest rates were up around 18% pa.
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