It might not be what his successor, Joe Hockey, wants to hear, but former Treasurer Peter Costello believes difficult times may not be far off for the fortunate country.
He believes Australia’s “luck is running out”.
The nation’s longest-serving treasurer spoke at a property forum, where he also told delegates that anyone who thought the cost of housing in Australia was high was wrong.
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“Australia’s luck is running out,” says former Treasurer Peter Costello
Mr Costello defended his view that the country’s happiness is beginning to run out as wages fall and consumer pessimism mounts.
He claimed that while Australia is “far” from a recession, the economy is undergoing major changes, leaving people with a sense of uncertainty about the future.
“For the first time since the 1990s, per capita incomes in Australia have stabilized – they are no longer growing,” added Mr Costello.
Consumers were “anxious” and “stopped spending”.
“Young people under 50, having experienced a period of uninterrupted income growth, are beginning to experience something very different.”
Consumers are “anxious” and have “stopped spending”.
Real wages were falling and disposable incomes had “peaked”.
The former Liberal Treasurer also pointed out that the household savings rate is now 10 percent compared to the booming 1990s when people spent all their wealth.
“People closed the credit card and opened a bank account,” he said.
Former Treasurer Peter Costello had some good and bad news for the man who succeeded him in the pivotal role of the coalition and federal government, Joe Hockey
Mr. Costello then turned his attention to the future of manufacturing in Australia. He insists there is still hope for the industry but it would no longer be a “bulk employer” for local workers.
In comments cheering Joe Hockey, Mr Costello appeared to bolster his optimism for the future of the housing market, who on Tuesday dismissed claims that he was in a bubble and risking a crash as a “rotten analysis” as a “lazy analysis”.
Mr Costello indicated that Australia’s strong population growth was likely to continue supporting the property market.
He also insisted that housing in Australia was “not expensive” compared to overseas markets, despite the Bank for International Settlements’ report suggesting the opposite. It turned out that Australia was the most expensive market in the world after Norway.
An unrenovated one-bedroom condo in Kirribilli has gone under the hammer for $1,255,000.
Needs a touch up, but this one bedroom in Kirribilli with stunning views fetched $1,255,000
“Building a house is comparatively cheap,” argued Mr. Costello.
“What is expensive in Australia is land. So we have an increasing demand, but we have a pretty restrictive supply of land.
As a result, prices are high.’
A recent top seller in the Australian property market was this $4.5 million four bedroom home in Burwood in Sydney’s inner west
He blamed this on state taxes levied on the release and transfer of land.
83 percent of the homes listed for option in Sydney over the first weekend of spring have sold, including a $4.5 million sale at Burwood in the inner west, and 80 percent of the homes on the hammer were in Melbourne sold. Brisbane, Adelaide, Canberra and Perth also had increased clearance rates
Mr Costello said sooner or later global economies would normalize if the US backed out of its money printing stimulus and interest rates started to rise again.
“It could still be a good time for real estate when things get back to normal… (but) there might be some hardships that we need to go through and readjust,” he said.