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[Podcast] Investing is getting harder; should I get out? | October 2022 Big Picture Podcast

[Podcast] Investing is getting harder; should I get out? | October 2022 Big Picture Podcast
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It’s been an interesting few weeks full of economic news which has led to a lot of uncertainty about the future of our economy and our property markets. My Podcast 405 The Macro Economic Context 03

If you’re a regular listener you’d know that once a month I catch up with leading economic commentator Pete Wargent for these Big Picture podcasts when we look at the macro factors affecting our economy and our property markets, and we’ve got a lot to discuss today.

Interesting, only a couple of minutes after we recorded this show, the Queensland Government did a backflip and repealed its outrageous Land Tax, so even though we spend a couple of minutes talking about this in today's show, this tax is no longer a concern, however the underlying tendency for Governments to see property investors as an ATM hasn't really gone away.

And in other good news Governor Philip Lowe is easing his foot off the economic brake to take time to assess the impact of the most aggressive monetary policy tightening since the early 1990s.

The RBA sensibly dropped back to a 0.25% hike this month taking the cash rate to 2.6%. Rba3

While it’s likely we’ll have one or two more 0.25% rate hikes, it looks like the peak of interest rate increases is in sight, and in today’s show, you’ll hear Pete Wargent and me give you our thoughts on what that means for our property markets.

I also chat with Pete about the latest US inflation figures and interest rate hikes there which spooked the markets as there was no sign that underlying inflation is abating and the probability of a recession in the USA increasing.

You may remember that Reserve Bank Governor Philip Lowe warned that a deteriorating global economy would make it hard for Australia to achieve a “soft landing” due to the economic buffeting that is underway.

At the same time, he also said he would not be surprised if house prices fall 10 per cent from their peak. But then only a day later Jonathan Kearns Head of Domestic Markets at the RBA suggested the falls could be 15%.

But I don't necessarily agree with them, and I explain why in today’s show.

Australians are the wealthiest people in the world

There’s lots of negative news out there, so let’s start with some positive news.

It might not feel that way, but Australians are the richest people in the world, according to Credit Suisse.

Soaring house and other asset prices raised the number of Australians who can be considered millionaires to nearly 2.2 million in 2021, and Australian adults’ median net worth was $US273,900 – more than Belgium, New Zealand, or any other country.

RBA rates warning: the global signs aren’t good

  • The outlook for house prices and shares worsened in the last few weeks as interest rate expectations rose.
  • The latest US inflation figures spooked the markets.
  • US Federal Reserve chairman Jerome Powell has conceded that the world’s largest economy might be heading for a recession.
  • RBA Governor Lowe’s appearance before the House economics committee very clearly communicated the view of the RBA that more interest rate rises are needed.

Will the economy go into recession?

  • The Reserve Bank is aggressively lifting interest rates from super-stimulatory levels to levels that more appropriately reflect the strong state of the economy.
    • A “technical recession” is defined as two consecutive quarters of economic contraction. Economy
  • The Reserve Bank has warned that it is treading a narrow path in its attempts to get inflation back down to the 2-3 percent target range while keeping the economy on an ‘even keel’.

Are the interest rate rises working?

  • RBA boss Dr. Phil Lowe now has two really important tasks:
  1. To lower inflation
  2. Not to send us into recession
  • We’re borrowing less – our borrowing capacity has been reduced.
  • The actions are yet to really affect others, not in worrying mortgage situations.

China tries to fend off a property crash

  • Beijing’s leadership faces a perilous test of nerve on its lending crackdown and zero-Covid strategy.
  • China struggles "to contain what could be the biggest property crash the world has ever seen." Crash
  • Over the past two decades, the Chinese housing market has driven growth and is currently the biggest asset class globally.
  • The market is bigger than the US stock market.

Links and Resources:

Metropole’s Strategic Property Plan – to help both beginning and experienced investors

Get a bundle of free reports and eBooks – www.PodcastBonus.com.au

Pete Wargent’s new Podcast

Pete Wargent’s blog

Some of our favourite quotes from the show:

“Our net wealth is actually higher than it was before. We’re not in a bad position.” – Michael Yardney

“People are now trading space for place.” – Michael Yardney

“Our mind is evolved to notice what’s not good about our current situation. That’s on purpose to help us strive to improve.” – Michael Yardney

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.


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