State Street’s ‘Mr. Risk’: Watch Australia’s Housing Market
Fred Goodwin, a macro strategist at Boston-based State Street, warned on Monday that a steep correction in house prices, while still a low probability, would hobble the ability of Australian banks to raise funds in the bond market given their heavy exposure to mortgages. Such a scenario would choke credit to the wider economy and exacerbate an economic downturn.
His views come as economists from Goldman Sachs GS +1.43% to BNP Paribas BNP.FR +1.09% warn of a growing risk of recession in Australia, a scenario deemed unthinkable even 12 months ago for a country that has enjoyed 21 years of uninterrupted economic expansion.After 21 years of expansion is a long time on one side of the cycle. How does that make it more unthinkable?