Updated Finance And Property Scenarios (Summary Findings)

Yesterday we ran a live discussion on our revised property and finance scenarios. For those who need to “answers” this is a brief overview.  We explain more about our thoughts in the full show (below).

  • Scenarios are a way of exploring different futures, and to consider the consequences, not as a forecast, but to facilitate understanding and debate.
  • None of these scenarios may turn out to be right…. Things change.
  • We use a framework driven from our core market model and we are going to look at the four potential outcomes, updated with the latest data and outcomes.

Business As Usual

  • Credit growth eases
  • Fall in prices continues, employment around current level
  • RBA still banking on household consumption to support growth.

Things Can Only Get Better

  • International rates rise out of cycle
  • Exchange rate down
  • RBA lifts rates – pressure on rates 50 basis points.
  • Credit growth slides.
  • Loss rates rise.
  • Home prices slide further.

Not Yet Doomsday

  • US rate rises trigger pressure in the USA
  • Flight to quality, to US$ or gold.
  • Capital exits Australia, need rates higher to retain investment, yet needs to cut to help the economy.
  • One bank in Australia would have issues, due to investor loans.

Armageddon

  • International crisis, pressure on economies.
  • Caught in the tide.
  • Unemployment lifts
  • Defaults rise.
  • Unusual measures.
  • Australia parallels Ireland (or worst)

For each scenario we look at a range of outcomes, and also apply a probability rating. The results are shown here:

You can watch the full show here: