Economist who predicted the Dot-com bubble issues a terrifying warning to Australia
By David Southwell For Daily Mail Australia
01:45 03 Jan 2024, updated 12:22 03 Jan 2024
An economic forecaster warns Aussie real estate could see more than a decade’s gains wiped out this year, and the world faces the most dire economic shock since the Great Depression in the 1930s.
US economist Harry Dent, who specialises in studying markets and generational consumer spending, told Channel Nine’s Today show that 2024 would see the economic good times come to a shuddering halt.
‘Every great boom has an end, and this last great run from 2009 has been 100 per cent from artificial stimulus, especially coming out of the United States and Europe, so that’s what makes this more dangerous,’ Mr Dent said.
By artificial stimulus, Mr Dent means world economies have been boosted by governments borrowing heavily or creating money to keep asset prices up, resulting in both stock market and real estate ‘bubbles’.
For Australia, Mr Dent’s main concern was what he claimed is an over-inflated property market.
‘You do have one of the biggest real estate bubbles, second only to China, and so I would be most concerned about real estate,’ Mr Dent said.
‘I would look at my real estate as an Australian and say ‘look if I go back to 2012 what was my house or office building worth?’
‘That’s probably the best sign of how much you can lose, and I think it is going to be more than most people think.’
Mr Dent also anticipates the Australian Share Market will halve in value this year going into next, meaning the benchmark S&P/ASX 200 Index will go from around 7600 which it is trading at currently to around 3500.
However, as dire as this may seem, Mr Dent predicts it will be much worse in America.
‘We have had two real estate bubbles now and two in stocks,’ he told Today show hosts Nick Coatsworth and Mia Glover.
‘Both peaking at the same time.
‘No one has seen long-term markets as good as this in real estate and stocks.’
He predicted the main US stock market in New York could lose 60 per cent in value, and the tech-oriented Nasdaq could crater by 90 per cent.
Mr Dent said the US had been inflating its bubble economy since 1995.
‘The last bubble era was the 1900s and it peaked in the 1929 top and a 89 per cent stock crash,’ he said referring to the notorious Wall Crash that ushered in the Great Depression an era of economic devastation that lasted almost a decade.
The popping of today’s economic bubbles should not be as severe because global economies were more modern and had more ‘backstops’, according to Mr Dent.
However, some good news was on the horizon, especially for Australia.
‘All you have to do is protect yourself for the next year,’ Mr Dent said, predicting a new boom would crank up in the latter part of 2025 centred around the Asia-Pacific region.
‘Australia will see much better come back from this because you are on the Pacific Rim and you have much better demographic trends, which is my specialty, because of your not only high quantity but high quality immigration from Asia.’
Although Mr Dent told the Today Show he had been bullish about the US share market for many years, he has been predicting the great market crash would happen since at least 2022, when he thought it would take place.
His timing may be off, but on the credit side, he has accurately called Japan’s 1989 economic collapse, the 2000 dot com bust when tech stocks plummeted and that Donald Trump would ride a populist wave into the White House in 2016.
Other forecasters have also painted a grim picture of the economic year ahead, although not as dramatic as Mr Dent’s.
The International Monetary Fund has predicted Australia’s economy will grow at a historically sluggish rate of 1.2 per cent.
This is well down on the average GDP growth of 2 to 3 per cent Australia has enjoyed since its last major recession in 1990.
Investment management firm Vanguard’s December economic and market outlook states that ‘higher interest rates are here to stay’.
‘Even after policy rates recede from their cyclical peaks, in the decade ahead rates will settle at a higher level than we’ve grown accustomed to since the 2008 Global Financial Crisis,’ the report reads.
To dampen Australia’s high inflation the Reserve Bank has increased the cash rate 13 times in the past 19 months seeing it climb to a 12-year high of 4.35 per cent
Vanguard Investments says the return to high rates will be ‘profound’ and expects the slowing demand to lead to jobs being shed, with unemployment rising from 3.8 per cent to 4.75 per cent over the space of 2024.
Housing prices may also fall but not steeply, according to property analyst SQM Research.
SQM Research managing director Louis Christopher wrote in November’s annual Housing Boom and Bust Report that he expects average city prices nationally to move in a range of -1 to +3 per cent in 2024.
However, he predicts just two capitals will keep the national average in positive territory.
‘The cities of Perth and Brisbane are the only cities expected to record price rises with each respective market driven by a tailwind of a recovering Chinese economy which is anticipated to see strong demand for base commodities such as iron ore,’ Mr Christopher wrote.
‘However, for much of the rest of Australia, the sharp deterioration of housing affordability, driven by ongoing interest rate rises which are now (in SQM’s opinion) at restrictive levels, plus an anticipated slower economy, will see a modest to moderate correction in dwelling prices take place in Sydney, Melbourne, Canberra and Hobart.
‘Adelaide and Darwin are anticipated to remain steady or record a minor rise/correction.’