Ausnomics #3

Ausnomics #3: The Illusion of Prosperity was published in ExposAsia No 22/2010.

The debate over the correct course of policy action has erupted again. Nobel Laureates, led by Joseph Stiglitz, are rallying to the banner of more Keynesian stimulus. They believe that there was nothing flawed in the previous credit-crazed boom. Their version of economics makes no mention of capital hetrogeneity or of the scope for making mistakes in the capital structure because of pricing and incentive distortions (themselves caused by government intervention and the actions of popularity-loving central bankers). Stiglitz recently visited Australia and described its response to the current (it is ongoing after all) global recession as 'the best in the world'. Coming from that source alone tells us that Australia is in deep trouble.

In ExpoAsia No 22/2010, Justin Pyvis describes just how that trouble is likely to manifest itself. Indeed, the beginning signs are there with a disconnect emerging between end-users of property and investors. One indicator has also signaled the first glimpse of house price falls. But it is the trigger for the property market downturn that Justin is interested in. Read on.

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