Australia

Posted: October 18, 2016 in Uncategorized

Australia is closing up as the best ever economy, 25 years of uninterrupted growth from 1991. Only Netherlands had a better period with expansion from 1982 to 2008 without contraction.

1991 population 17.2 million, today 24.1

GDP per capita soared 59% 1991-2016

All this has been due to the mining boom and because the foreigners see Australia as a safe country as they are financing our debt by 63.8%. And the short term (90 days) foreign debt is at about 23% of the total debt.

Per converse household borrowing is at 154% of disposable income (34% in 1991), while, by OECD standard, houses are overvalued by 29% and rent by 48%.

Effectively what can spark a recession is linked to my technical article yesterday – the steepening bond yield curve.

As Australian debt is dependent on foreigner and our banks access capital overseas – a more expensive capital overseas will produce an increase of interest rate in Australia (even “out of RBA cycle”).

As the Australian GDP is composed by 56% by consumer spending and the consumer is so much in debt you can easily see that this is the biggest issue by far in Australia (together with what is really happening in China).

So the US steepening of the curve and Federal Reserve behavior is paramount also for Australia.

And the Reserve Bank of Australia only “other” remaining weapon is…quantitative easing.

Interesting time ahead.

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