Invest
Australia ‘needs a fully-fledged recession’: Koda
In order for the Australian economy to reckon with its deficit and establish solid reform, a “fully-fledged recession” is needed, the CIO of a wealth management firm has said.
Australia ‘needs a fully-fledged recession’: Koda
In order for the Australian economy to reckon with its deficit and establish solid reform, a “fully-fledged recession” is needed, the CIO of a wealth management firm has said.
Speaking in Sydney this week, Koda Capital’s chief investment officer Brigette Leckie said Australia will only be able to address its deficit through a recession.
“The only time you get decent policy change is when your back is against the wall,” she told attendees at the Association of Goals Based Advice conference.
“We escaped the last two global recessions for a lot of well-known, documented reasons but in order to get genuine, real, reformist policy out of Canberra, we need to have a fully-fledged recession.”
Part of the problem, Ms Leckie explained, is that Australia is “way behind” in the science, technology, engineering and mathematic fields (STEM) and worse: “That’s really where the future is whether we like it or not.”
This area needs reform because all jobs in the future will have a (STEM) element, she said, arguing that “the whole education debate is going the wrong way”.
“My view is that in the next global recession Australia will not be immune, I think we'll really come unstuck.”
She explained that the entire international world was facing serious disruption in terms of artificial intelligence, driverless cars, robotics and life sciences.
“You can see it in the data now and… I think we’re on the cusp of what we're calling the fourth industrial revolution.”
However, this revolution will bring challenges for white-collar workers, she continued, noting that anything that is repeatable will be taken up by artificial intelligence.
Ms Leckie said: “The point of all of this is it's deflationary. We've had this enormous bull market yet, right around the world, inflation is below its inflation targets, the US, Europe, Japan, and even here.
“And the problem with this is many central banks can't normalise interest rates, so we're in this environment whereby if you've got access to financial assets you're getting wealthier and wealthier. If you haven't, then you're in strife.”
She warned that this phenomenon means workers now and into the future will struggle as wages stagnate and automation increases. “The only way to make money is to have a good idea and be able to sell it,” she predicted.
In her opinion, this is the reason why wage growth has been sluggish – people who have lost jobs are constantly needing to reskill.
“Putting this together… this backdrop is giving you an environment of low inflation and low interest rates but it's also giving us this rising income inequality.”
Ignore rising income inequality ‘at your peril’
Noting that asset prices have “soared” as wages have “done absolutely nothing”, Ms Leckie said income inequality will end up painful for all.
She pointed to the fact that income growth in Australia has averaged at 2.3 per cent while major cities’ house price growth has sat at 12.4 per cent according to IMF figures. The same disparity is occurring in China, Japan, India, the UK, Canada and the US, although to varying degrees.
“As we get more and more job layoffs as technology permeates, governments are going to have to respond with increased nationalistic policies,” she said.
This could mean bans on foreigners buying or owning property, as has been seen in Canada and New Zealand.
“[This] is something to keep an eye on,” she continued, arguing that the most likely way governments will address rising income inequality is through cracking down on financial asset ownership.
“The other thing — which is far more alarmist — is this escalates to the point whereby we end up with a revolution.
“Now we've gotten through this year’s European economic cycle, we've gotten through the feared elections in the Netherlands and Germany but the next cycle will be different [and] there are going to be… underlying issues coming from this, so ignore at your peril.”
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
