Forgive the clickbait headline, the forecast comes from Saxo Bank’s annual tongue-in-cheek “outrageous predictions” report – an exercise of provoking unlikely, but not impossible, events that may just play out in 2019.
Australia’s property market got off relatively unscathed in the global financial crisis compared to other advanced economies, with the surge in house prices leading to a monstrous 373 per cent (adjusted for inflation) gain since 1961.
But the debt-fuelled “Australian dream” is soon to end.
Saxo Bank’s outrageous predictions forecasts the curtain’s closing on Australia’s property binge in a “catastrophic” shutdown driven by plummeting credit growth.
The report says that the confluence of dramatic restrictions in credit growth, oversupply, government filibusters and a slowdown in global growth cement the doom loop: causing a cataclysmic 50 per cent crash.
“The Australian’s call themselves the lucky ones,” Saxo Bank chief economist Steen Jakobsen said.
“It seems the luck could run out in 2019.”
Other “outrageous” predictions in Saxo Bank’s report include Australia falling into its first recession in 27 years, with the government launching a “TARP down under” and nationalising the big four banks.
“The banks’ exposure is too great for them to cover independently and to skirt the risk of insolvencies and collapse, the RBA moves in to purchase securitised mortgages and fund the government’s recapitalisation of its major banks with a whopping AU$300 billion QE/TARP programme.”
Before you start burying gold in your large backyard, there’s no immediate cause for concern – the point of the report is solely to provoke debate.
“[The point] is to expand our awareness of what might go wrong in 2019,” Jakobsen said.
“Through this process, we can prepare for potentially earth-shaking challenges to our portfolios and even our livelihoods.”