“$70 Million of Taxpayer funds….wasted!”

Now, in normal times this kind of headline would make quite a few people upset and, dare I say, angry…!?

But these are not normal times, and with the Australian government spending hundreds of billions trying to save the Australian economy, what’s $70 million in the current scheme of things?

I don’t blame you if you have forgotten what this $70 million was spent on.

The 2018 Royal Commission into banking sector practices!

The $70 million was the amount it cost the Australian taxpayer to run the Royal Commission. Its findings were explosive – rampant fraud and misleading activity across their investment, super and insurance arms.

APRA passed judgement: it mandated an increase in capital requirements for Australia’s biggest banks, announced October 15th last year.

Now recently, with little fanfare or coverage, with most people focused on COVID-19, APRA announced that the same capital reforms…would be deferred.

Here’s our hot take; those capital requirements have not been deferred.

In fact they will never again see the light of day.

The government will instead turn to our biggest banks, you know the ones that are ‘too big too fail’ to help lift the country out of recession.

With the shackles removed it’s easy to imagine pressure building to see earnings increase once the COVID interruption is dealt with.

It means massive credit creation will be unleashed into a recovering economy. It means…the seeds of the next great boom are now being sown.

Now, I wish I could say this is simply a once-off, never to be repeated move. However the history documented in Phil Andersons, The Secret Life of Real Estate & Banking states otherwise.

Page 299; “…in December 1990 it (The US Fed) reduced or eliminated reserve requirements on certain bank liabilities…

Note 30 years ago

Page 312; “……So the Fed dived back into its tried and tested toolbox….lowering interest rates in quick succession, again, opening the money spigots somewhat…this time the stock market does not respond so quickly and the capital spending of business doesn’t seem to move“.

Note 20 year repeat

In May of 2002, the US Congress…voted to extend US farm subsidies to a record total…

Echoes here of the incredible stimulus measures: now coordinated globally.

In other words, we are confident in forecasting what will happen because we have seen it all before.

Every cycle, something always arises to ensure that banks can lend freely during the second half of the 18.6 year real estate cycle. It means lots of cheap money is available to invest – and most of it ends up in the property market.

This is all coming together nicely:
an unprecedented level of
stimulus, globally, and a banking
system “off the hook”.

This is all building up to be the biggest boom of all time.

We can teach you the 228 year old secret the rich don’t want you to know.

You can educate yourself to future movements of the cycle here.

Best wishes

Akhil Patel
and your Property Share Market Economics team.