Follow the ABC's Peter Ryan. Analysis of global and Australian business, finance and economics.
Thursday, April 3, 2014
NAB boss Cameron Clyne retiring at 46 to spend more time with his family
Here's my interview with National Australia Bank chief executive Cameron Clyne who surprised the market by announcing his retirement this morning.
Wednesday, April 2, 2014
Property speculation warnings: we've heard it all before. But are investors listening?
Revelations about surging property prices in
Australian capital cities have renewed worries that a dangerous real estate
bubble might be emerging.
But while the warnings have been getting
louder in recent months, they're hardly new.
The Reserve Bank governor Glenn Stevens has
been on the front foot in recent years with a message that investors should not
expect instant capital gains from property investment or speculation.
While avoiding the "bubble" word, the warnings have been straight-talking and
jargon free - clearly designed as a reality check for unsophisticated property
punters.
Back in March 2010, Mr Stevens took the unprecedented step of going on breakfast television to deliver a wakeup calls to a broad general audience.
For the usually reserved Mr Stevens, it was a
significant departure from addressing the usual specialist suspects -
economists, academics and finance journalists.
" I think it is a mistake to assume that
a risk-less, easy, guaranteed way to prosperity is just to be leveraged up in
to property. It isn't going to be that easy," Mr Stevens told
Channel Seven's "Sunrise" program.
The not so gentle message came a few months
after Mr Stevens declared the emergency from the global financial crisis was
over and that interest rates were about to move higher back to a normalised
level of around five percent.
In other words, Mr Stevens warned back then
that with rates on the rise, investing in bricks and mortar was no longer the
easy path to prosperity it was in the latter part of the 20th century.
Glenn Stevens' warning from that interview
resonate now - four years later - amid signs that the cash rate could start
rising from 2.5 percent as early as Melbourne Cup day.
Here's how he began the softening-up process
in March 2010 for both borrowers and lenders who could be exposed to the
fallout from rising rates:
"I think it would be not doing people
any favours to have a prolonged period of very low rates and then hammer them unexpectedly,"
Mr Stevens told Sunrise.
"And of course the banks that are
lending them the money should be - and I'm sure are - testing the potential
borrower: can you handle some rise in interest rates?"
Fast-forward to March 2014 and the similarity
of the warnings is striking.
Just last week, the Reserve Bank warned inits latest Financial Stability Review that Australian banks could fuel real
estate speculation if they weaken their lending standards.
The RBA warned that the pick-up in lending
for houses would be "unhelpful if it was a result of lenders materially
relaxing their lending standards".
While the Reserve Bank did not refer to a
property "bubble", it again warned investors about the risks of real
estate investment and that low rates "have the potential to encourage
speculative activity in the housing market".
And once again, the RBA warned investors that
while house prices can rise, they can also fall:
"It is important for both investors and
owner-occupiers to understand that a cyclical upswing in housing prices when
interest rates are low cannot continue indefinitely.
"And they should account for this in
their purchasing decisions."
The RBA's strongest warning yet follows concerns from the Australian Securities & Investments Commission that self-funded retirees were exposed
to price falls by leveraging into real estate to boost returns.
And late last year the International Monetary Fund has cautioned that therecent surge in Australian property prices and rising investor expectationscould cause values to "overshoot".
In that Sunrise interview four years
ago, Glenn Stevens described himself as "Sydney's most boring person,
really."
But his early words of warning on housing
could prove prophetic as the window of short memories appears to getting shorter.
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