Likewise I have predicted that in the coming 12 months AUS unemployment will not exceed 7.5%.

But I’d have to say that there is some very gloomy commentary about the world scene with some well-informed people wondering whether whatever is being done is going to fix it.

Every single developed economy (and several developing economies) are now in the steepest downturn in 50 years, at a time when the global economy is deeply interconnected. Does anyone seriously believe the RBA pushing on a string, and Kev spraying around a few billion, will magically save Australia from recession?

PROPERTY prices in Surfers Paradise have collapsed by more than 45 per cent as the credit crunch continues to hit the Queensland housing market.

Surfers Paradise recorded a fall of 45.1 per cent in the latest Real Estate Institute of Queensland survey, while other Gold Coast suburbs such as Burleigh Heads (31.1 per cent) and Runaway Bay (30.3 per cent) also fared badly.

The survey shows the median house price on the Gold Coast fell 4.8 per cent to $466,500 over the September quarter.

It’s hard to see house prices going down for here in SEQ for any length of time. The Qld Water Commission is planning on a medium scenario where population increases from 2.8 million in 2006 to over 6 million in 2056. The local rag today has a story saying that we need 90 new homes a day for the next 20 years, or an increase of 735,500 dwellings to be built in the region by 2031 as against 1.1 million now.

BTW I received information the other day that according to a leading indicator the economy in SEQ has turned – in the last two weeks. Apparently people are back buying furniture again according to one retail chain. They first noticed the downturn back in March-April when the Reserve Bank was still jacking up interest rates. Now when the MSM is full of doom and gloom and lagging indicators like employment numbers are going to the dogs, people have started buying furniture again, and I’m informed it is not because of insurance claims for houses destroyed in storms.

It might be better than reading tea leaves and if it’s true you read it here first.

My feeling is that this slowdown if probably pretty serious, meaning significant layoffs which will have to hit the housing market.

If you earn $50k a year, would a $75k mortgage be a great burden?

Of course not, but its Keen’s thesis that its the growth in debt that fuels most of the growth during the economy’s “euphoric period”. Eventually debt levels overwhelm the economy, there’s a “Minsky Moment”, sentiment turns dramatically and people start selling assets at firesale prices to pay down debt, which drives the economy into a debt-deflation.

presumably the financial crisis will cause it to slow down and plateau

Except its never behaved like that before. What’s happened in the past is debt-to-GDP has either peaked and crashed (e.g. the depressions of the 1890s and 1930s) or dipped briefly then started growing again (e.g. recessions in the 1970s, 1980s and 1990s).

Its entirely possible this could be another “ratcheting up” event, but given the causes and seriousness of this downturn its increasingly likely this will play out more like the 1890s and 1930s than more recent recessions.

Can the authorities engineer a different outcome this time? Perhaps. If the US had entered this crisis in sound financial position then I’d have more confidence. But as we all know, US budget and trade deficits were horrendous before the crisis began, and are now in basketcase territory.

What the Australian authorities do is neither here nor there. If the Yanks mess this up the tsunami is coming (via China) and there’s b*gger all we can do about it.

GDP is national income. It’s not a problem that your yearly income is less than your debt, as long as you can meet the interest payments.

Think of it this way: would most people have difficulty supporting a mortgage that is 150% of their income? If you earn $50k a year, would a $75k mortgage be a great burden?

And although the line seems to suggest that national debt is accelerating, presumably the financial crisis will cause it to slow down and plateau, since there will probably be less Australians wanting to borrow, and less foreigners willing to lend.

Yeah, yeah, correlation is not causation, but show me another chart as compelling as this one.

Middle management personnel are the core of the real estate economy. These disemployed folks will be selling their slice of the Australian Dream under nightmare circumstances.

By geometric logic, residential real estate prices in major Australian population centres will inevitably fall significantly.

(Note dimensional consistency)

Nothing else – overbuilding/underbuilding/blah – matters.

Current median house price in Australia = 5-6 x median household income.

Overpricing: 50%

If my memory serves me corectly, he put his mortgaged apartment in Surry Hills up for auction with a reserve of $540 000 but it was passed in some $20 -30 000 short. Negotiations with the highest bidder continued until a third party came in with the necessary reserve plus some.

He had bought the 2 bedroom Surry Hills unit some 3 – 4 years ago for somewhere in the high 4’s. but with his resolve for having no debt/millstone in the curent crisis, he is now either homeless or renting.

Non-believer Gerard Henderson offered him 40% less than his reserve prior to auction, but the canny Keen held out. My money’s on Robertson walking.

In future, run enerything together into rambling chunks of text, without a thought for good writing. Rules are important you know. I actually take this one as a mandatory quota rather than a maximum, which can be a struggle when you’ve only got one sentence worth of material.

Actually, you’re not really likely to be taken to task if your comment is well thought out and well informed, as was yours. Unless some drunken dork has just discovered how to do special characters.