australia headed for the perfect storm, page-56

A recession is fantastic for those that keep their jobs as loans are much cheaper to service. Certainly no argument there.

Most bank funding comes from international markets, who price risk. If they think the Aussie property market will tank they will seek a premium well above the RBA cash rate. Aussie banks have been getting cheap funds via deposits but this is lessening due to the search for higher yields.

Australia has not had a recession since the early 1990s and people have short memories. If people start losing their jobs on mass it will be a game changer for the property market. If you can't service the loan you are forced to sell or the bank takes possession and sells in a depressed market.

The financial services industry has been shedding significant jobs for the last 2 years and it seems to be speeding up. Factor in a slowdown in mining and its hard to see where future growth will come from.

I don't want to paint a gloomy picture but there are some very dark clouds on the horizon for the Aussie economy. Everything hinges on employment. If we escape a recession I don't expect property prices to dive, but on the flip side it's a very different story.