Speaking at the annual conference of the Finance Brokers Association of Australia (FBAA) on Friday (24 November), Mr Switzer told delegates that while the economy is strong now, he suspected that a recession would hit Australia by 2020.
The former lecturer in economics said: “We’ve lived through one of the longest boom markets of all time, which has been one of the slowest boom markets of all time as well.
“We have gone for 26 years without a recession and we hold the world record for it. No country as ever done it. So, this puts us in a very special position… and in the modern world, that is a great achievement. That says something about us, but also it says something about our future as well.”
In his speech at the FBAA conference, Mr Switzer added that the reason why the country had not had a recession for 26 years was because of the strength of the banking system.
“Love them, or hate them, the banks were good… Banks are in the top 50 in the world, during the GFC they were in the top 10. Banks have been good to us.”
He continued: “The economy is still doing well now though, the deficit is going down, unemployment is at a nine-year low, employment is up, business borrowing is now surging (something we weren’t seeing 12 months ago). Overall, lending is at a seven-month high… It may be down in certain sectors, but it’s picking up in others.
“And we haven’t seen a serious housing collapse. We could have seen house prices rapidly flat in Melbourne and Sydney — but we aren’t seeing that. Sure, they are coming off the boil, but we aren’t seeing that collapse that some newspapers are talking about. Business profits and condition are at a record high… annual wage growth has been low but will probably slowly improve.
“So, what are we whinging about? This is not a bad economy. It could be better, and I think 2018 will be better.”
However, Mr Switzer painted a darker picture for the medium-term future, saying: “Eventually, a recession will come, without a doubt. The stock market is going up (maybe not as fast as I would like), but, eventually, it will go to a higher level… interest rates will go up pretty rapidly and the stock market will spook and we’ll see a downturn in the market and we’ll see a recession.
“I suspect it will be in 2019/2020… it could even be longer, but the reason is interest rates are so low, historically low. And the only way is up.”
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.