We are told by the Turnbull Government that the economy is strong and that they have delivered on their promise of jobs and growth. However, wage growth is stagnant and there are fits of stock market turbulence. Some believe since the lesson of the 2008 global financial crises have not been learned that we have created the conditions for another. One person who believes we could be on the verge of another financial crisis is John Adams who is a former advisor to Liberal Senator Arthur Sinodinos a policy officer at the Department of Finance and is now a management consultant to a big four accounting firm. His economic analysis has been featured in News Corp publications, he has also appeared on the ABC’s The Drum program and also written political commentary for The Spectator Australia and he joined us in the studio to discuss his hypothesis.
John takes us through the signs Australia is facing economic Armageddon including Australia’s record housing debt at 187% of GDP and housing credit or home loans being at 95% of GDP. The main driver is lower interest rates and an increase in the money supply which is set out by the Austrian and Minsky Schools of Economics. The extra money in the economy causes malinvestment in the economy in both the housing and stock market while the CPI stays the same hiding inflation. There are two ways to resolve it, keep printing money or significantly raise intereset rates which would cause an economic depression but properly reset the economy and result in stable growth.Given that monetary policy is set independently in Australia John sets forth fiscal measures the Turnbull Government can take.
John also explains how Australia is vulnerable to global economic turbulence due to high levels of debt of foreign governments, households and non-financial firms. He sets forth how an overseas currency crisis or sovereign debt crisis could affect us here. John also explains what the derivatives market is and why it matters. John in his political writings has also been critical of Malcolm Turnbull’s Prime Ministership believing it to be a failure. I ask John who could do a better job if anyone and whether a change of leader is at all likely.
Links to John Adams’ News Corp Work
Australia headed for ‘economic armageddon’ – February 2017
‘It’s too late’: Seven signs Australia can’t avoid economic apocalypse – July 2017
Ten signs we’re heading for ‘economic armageddon’ – February 2018
Six pathways to Australia’s ‘economic armageddon’ – June 2018
How to prepare for ‘economic armageddon’ – June 2018