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Steve Keen, They Hardly Knew You

The latest 12-month consumer house price expectations from Westpac-Melbourne Institute:

Some 73% of respondents expect prices to increase over the next 12 months with 15.9% expecting no change and 9.9% expecting a decline. The proportion expecting an increase compares with 53% in July and 32% – a minority – in May.

posted on 20 October 2009 by skirchner in Economics, House Prices

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According to a story in today’s Age, Keen is still out and about spruiking his doomsday scenario (http://www.theage.com.au/news/business/money/planning/curiouser-and-curiouser/2009/10/20/1255891802253.html). He’s simply gotta wear that T-shirt when he does the walk. It’s not the same without the T-shirt!

Posted by .(JavaScript must be enabled to view this email address)  on  10/21  at  10:52 AM


But Glenn Stevens has made it abundantly clear that interest rates are going up, not down. And reading between the lines, he seems ‘keen’ to ensure that Australia does repeat the US mistake of inflating house prices.

Posted by .(JavaScript must be enabled to view this email address)  on  10/21  at  12:43 PM


Sorry, I noticed an error after I had submitted the post, but could not re-submit because of your 900 seconds rule.
Should have read:
“that Australia does NOT repeat the US mistake of ...”

Posted by .(JavaScript must be enabled to view this email address)  on  10/21  at  07:33 PM


Kind of appropriate Keen was talking at the museum!

ED, while housing activity is certainly interest rate sensitive, I think it would be wrong to conclude the RBA is targeting house prices at the expense of inflation.

Posted by skirchner  on  10/21  at  10:49 PM


he seems ‘keen’ to ensure that Australia does repeat the US mistake of inflating house prices.

I think that horse may have already bolted!

But no matter,  Australia is now riding on the back of the biggest bubble yet: China Boom 2.0.

Here’s a picture of an economy gone mad.  No speculation here, move along, move along…

GDP growth back to double-digits.  Investment share of GDP now north of 45%, but exports still down more than 20% YoY.  But hey, who needs customers, this is the new China where anyone can get a loan. 

Sound familiar?

Posted by .(JavaScript must be enabled to view this email address)  on  10/22  at  03:30 AM


Agreed.  And, of course, its all thanks to the Chinese government’s expansionary fiscal and monetary policies. Hopefully, our govt will have the foresight to use this boom to pay off its debts before the bubble bursts.

Posted by .(JavaScript must be enabled to view this email address)  on  10/22  at  03:57 AM


This is one case where I agree its all down to government interference, driven by strong desire for self-preservation.  Without the stimulus China would have felt the full effects of the GFC, and so would Australia.  Indeed I very much doubt Australian house prices would be rising strongly today without the Chinese stimulus.

For some reason, known only to themselves, the Chinese insist pouring money into more productive capacity to service customers who have stopped buying.

Michael Pettis is your go to man for anything on China: China’s September data suggest that the long-term overcapacity problem is only intensifying

According to my model of China’s overcapacity problem, the source of the imbalance is a set of industrial policies that systematically shift income from households to producers, and as long as these policies continue there is little chance of resolving the problem of excess production.

Although China is still a very poor country, there is no question that Chinese household income has grown substantially over the past few decades, but it has not grown nearly as quickly as GDP. While China’s GDP grew at 11-12% over the 2002-2007 period, for example, MIT economist Yasheng Huang estimates that household income grew at a much lower 9%.

The Chinese need become good little consumers, but they’re doing precisely the opposite.  Mssrs Stevens, Henry and the RBA board seem oblivious to any risks in China.

Posted by .(JavaScript must be enabled to view this email address)  on  10/22  at  10:16 AM


Pettis link broken above, just go to mpettis.com

Some more on China imbalances:

But there were a couple of eye-popping numbers in yesterday’s third quarter statistical report from China.

Over the first nine months of 2009, China’s infrastructure investment grew by 53 per cent. Of the three-quarter GDP growth of 7.7 per cent, 7.3 per cent was accounted for by investment (consumption was 4 per cent and falling net exports subtracted 3.6 per cent).

As a result there is now tremendous over-capacity being created in China. When the government stops spending so much on infrastructure, the slack is unlikely to be taken up by domestic consumption or exports.

And the other eye-popper was money supply. M2 growth was 29.3 per cent, year on year. Total outstanding loans have grown 28 per cent since the start of the year (in Australia they have fallen).

Over-investment and galloping debt can be a nasty combination, but normal rules seem to have been put on hold in China, at least for a while.

Interestingly, the Economist says there is no China Bubble, and I know how you’re a fan of The Economist.  Contrarian indicator?

Posted by .(JavaScript must be enabled to view this email address)  on  10/22  at  11:26 PM


My CIS colleague John Lee has been highlighting the deep-seated structural problems in China. 

Story has to be on the cover for full contrarian status.

Posted by skirchner  on  10/22  at  11:58 PM


RE: CIS, IPA etc

I hear Monckton will be one of the speakers at the IPA Conference on the Economics of Climate Change Policy.  Seriously, you guys do yourself no favours by engaging with these nutters.

Posted by .(JavaScript must be enabled to view this email address)  on  10/23  at  06:44 AM


David, IPA is not CIS.  He is not the sort of person we would invite to speak at any of our events.

Posted by skirchner  on  10/24  at  12:04 AM


According to today’s ABS release, Keen will be on his way!

Posted by .(JavaScript must be enabled to view this email address)  on  11/02  at  12:52 AM



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