He's argument does make sense. If this thing goes down Japan 1990 style, we can expect huge asset deflation in stocks and real estate. Those paying off debt will a.) be loosing money on a depreciating asset and b.) loosing money because they need to pay way above CPI all at a time when real wages are falling. Cutting rates aggressively would be the only way to stimulate any spending - it would have to be done. Welcome to the land of carry trades Oz style.
I just want to start getting my money the hell out of Australia. We have hardly seen real estate prices drop. Now it is looking more and more likely that we are going to see a huge drop in commodity prices, our unemployment is going to go up, our dollar down, import prices up, asset prices down and wages down. When this all happens, real estate will get crushed and our "well capitalized" banks aren't going to be looking so well capitalized anymore. This will lead to further tightening of lending standards and more crushing. This is going to go down as the biggest bust in Australian history and I don't want my dollars having anything to do with it.
BTW, when Rio Tino says "reviewing its capital expenditure plans" that is code for "truckloads of Aussies are about to face the chopping block". House prices 9x Median wage anyone?
