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:
