Steve Keen has his supporters…..
In late 2008 Steve Keen, Associate Professor of Economics and Finance at the University of Western Sydney had a bet with Rory Robertson, who at the time was Interest Rate Strategist at Macquarie Bank. The bet was Australian housing prices would decline by 40% in two years, and the loser would walk 200km from Canberra to Mt Kosciuszko. Despite losing the bet, Steve Keen still has his supporters. Last week, Dean Baker the co-founder of US based the Centre for Economic and and Policy Research said the housing bubbles of the United Kingdom, Canada and Australia, are larger, relative to the size of their economies, than the one that collapsed and wrecked the US economy. In each county, there has been a sharp increase in the sale price of homes that has not been matched by a corresponding increase in rents. In Australia’s case, Baker claims house prices rose by more than 80 per cent between 2001 and 2009, a period when rents rose by roughly 30%. Baker argues the price of the median house in Australia is 225 per cent of the median house in the US. Given that wages in the US are higher it is difficult to see how this huge gap in house prices can make sense, said Baker.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
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