While we at Crikey have made some howlingly bad political predictions over the years, we’ve always tried to stay cautious on negative economic predictions, wary that too many people talking about a recession is likely to increase the chances of one actually occurring. But others in the media feel no such qualms. Indeed, the doom’n’gloom business is a busy little subsection within the Australian media. So we thought we’d check up on how some of the gloomier predictions of recent times have fared.
Top of the list, of course, is Steve “I predicted the financial crisis” Keen. Not withstanding a humiliatingly wrong prediction on property prices in 2008, Keen’s predictions are still treated with utmost seriousness by some journalists. In August 2016, Keen predicted another property price crash in 2017 and a recession, because the Reserve Bank “don’t know what they’re doing.” Australians could prepare for the looming crisis by selling assets and reducing debt, he advised. He repeated the recession prediction early last year.
We’re still waiting for Keen’s recession and property collapse — economic growth was 1.9% in the first three quarters of calendar year 2017, while property prices in Sydney, Melbourne and Brisbane grew 8.3%, 9.4% and 13.2% respectively in the year to September 2017.
Then there’s professional pessimist Gerard Minack, inexplicably given a platform by Four Corners last year, who warned Australia’s property market was a “powder keg”, and who has serially over several years warned Australia has been at high risk of recession, including April last year when he claimed (again) that there was a one-in-three chance of a recession — not in 2017, as he’d suggested in previous years, but in 2018. However, we’re still waiting for the global recession that Minack said was “on the cards” in the next two years, back in February 2016.
That might come along around the same time as the recession that Warwick McKibbin predicted was an even chance of happening in 2016, possibly caused by Labor not supporting former PM Tony Abbott’s “free” trade agreement with China. McKibbin thought industrial relations reforms to curb workers’ power so that employers could slash wages more easily would help thwart the coming recession.
Then there’s British economist Jonathan Tepper, who said the Australian property market was “Ponzi financing” and predicted in 2016 that house prices would fall 30-50%. Since then across all capital cities, they’ve grown 16%, but what’s a 50 percentage point margin of error between friends? Maybe Tepper’s crash will come along when the property “bloodbath” predicted in 2015 by Lindsay David and Philip Soos happens. That was was “a near certainty”, they claimed.
For a slightly contrary view, Michael Pascoe recently forensically took apart the argument that we’re in for a property crunch led by overeager developers.
The ABC’s Michael Janda is another regular bear on housing. In 2016, he urged young people not to buy housing, partly because we were in “one of the world’s biggest property bubbles” and a housing glut was looming in Australia. “Why buy now when you can get more choice and cheaper prices later?” Housing prices have gone up nationally by 11% since then. Last year, Janda quoted economic consultants warning that a slowdown in residential construction would undermine growth in 2018. And Janda is still warning of a housing crash. “The start of the year prompts a flurry of forecasts, most of which turn out to be hopelessly wrong,” he began that piece with. Well, indeed.
The property crunch doomsayers are closely related to the mortgage stress doomsayers. Late last year, a mob called Digital Finance Analytics garnered plenty of media coverage (which was the point) with a warning that “nearly a million households” (actually, just over 900,000) faced “mortgage stress” — something Four Corners obsessed about earlier in the year.
Problem is, much so-called “mortgage stress” is bullshit — it’s defined as where any household has more costs, including mortgage repayments, than income — without recognising households can and do change their costs in response to their circumstances, including interest rate movements. It bizarrely includes households that have a “tight budget” but make their repayments perfectly well, and households that might struggle if interest rates rose significantly.
But it’s not in the interests of the media to point that out. Much better to peddle the lie that the property market is permanently on the brink of meltdown, and a recession is just around the corner. More clicks that way.