The chief investment officer of a Sydney-based wealth management firm believes that a blinkered view of macroeconomic data will “come and bite us” in the coming years.
Speaking in Sydney last week, Koda Capital’s chief investment officer, Brigette Leckie, said that Australia will only be able to address its deficit through a recession.
“The only time you get decent policy change is when your back is against the wall,” she told attendees at the Association of Goals Based Advice (AGBA) conference.
“We escaped the last two global recessions for a lot of well-known, documented reasons, but in order to get genuine, real, reformist policy out of Canberra, we need to have a fully fledged recession.”
The CIO explained that wages have “done absolutely nothing” while Australian asset prices have soared, as low interest rates inflate assets and benefit those who own them. Meanwhile, living standards are collapsing. In this environment, those fixated on the standard macroeconomic data “are missing the point”.
“I think, ultimately, this is what’s going to come and bite us,” Ms Leckie said.
The CIO believes that technology will gradually replace jobs, creating layoffs and forcing governments to respond with “nationalistic policies” such as banning foreign ownership of Australian real estate.
“We’re already seeing smatterings of that — we've seen it in Canada, we’ve seen it in the last couple of weeks in New Zealand. I think that is something to keep an eye on.
“If you ask me where this is going to end, what is going to cause it, I actually think government policy clamping down on financial asset ownership could do it.
“The other thing — which is far more alarmist — is this escalates to the point whereby we end up with a revolution.”
Rather than being “totally fixated on the economic and macroeconomic data”, Ms Leckie urged financial professionals to keep an eye on what is going on and politically keep abreast of any policy changes.
Her comments come after Westpac chief economist Bill Evans warned mortgage brokers and real estate agents that a Labor win in 2019 will create major shifts in property investor sentiment as new tax policies are introduced.
Speaking at a Loan Market event in Sydney on 20 October, Mr Evans told mortgage brokers and real estate agents that as we head into 2018, people are going to start focusing on Labor’s tax policies.
“I’m not sure which way it will go. Investors may think, ‘Well, the negative gearing changes are going to be grandfathered so I better get in now,’” Mr Evans said.
“You might see a surge in investors next year.
“But watch out what happens when you get a change of government. The whole thing might roll over, or people could become more cautious, worry about retrospective changes in the rules, and things will flatten out as we get closer and closer to that election and a change in the policy environment.”
[Related: Government ‘pretty much broke’: Evans]