Lucky country to defy the odds

Stephen van Eyk

A majority of Australia’s most senior financial services industry executives are optimistic about the future of the Australian economy, with the notable exception of van Eyk Research managing director Stephen van Eyk, a Money Management review has found.

“What’s my personal view on the outlook for the Australian economy? Screwed,” van Eyk told Money Management.

According to van Eyk, global conditions mean the potential for Australia’s economic growth is now significantly reduced.

“I think there are signs of real stress out there at the moment. We’ve had utopia for a while. Now we can only grow at 3 per cent and not get inflation,” van Eyk said.

The researcher believes a near-recession could be in store, with Australia’s economic growth potentially dropping to 1 per cent in the latter half of 2008 and the possibility for 12 months of sluggish growth.

However, the future isn’t entirely bleak, with van Eyk predicting interest rates will be lowered once again in 2009, prompting a recovery.

“And we’ll still benefit in the long-term from our association with China and our resources,” he said.

It is optimism such as this that is the dominant sentiment among senior financial services industry executives.

Australia is “a great country and an economy that will pick up momentum again in time”, Tower Australia chief executive officer Jim Minto said.

In fact, almost all of the executives surveyed told Money Management they believe the global downturn will create opportunities, not only for the market to correct itself, but also for savvy investors to pick up a bargain.

“For the year to come, there will be a much better appreciation of credit, liquidity and market risk. Investors both individual and corporate have shown poor appreciation [of this] in recent years,” Minto said.

BT head of investment markets Hans Kunnen said he remains an “unashamed bull” when it comes to the Australian economy.

The general sentiment of the market leaders seems to be that the smart way to deal with the increasingly grim sentiment in the media and within the industry itself is to simply ride out the bad times and focus on the overall picture, which is positive.

Some of the executives surveyed believe there is a need for changes to regulation in order to prevent a repeat of the recent high profile troubles of companies such as Opes Prime.

“The disclosure model has come under extreme pressure and has failed to alert investors to the underlying risks,” Minto said.

“There needs to be more attention paid to the substance of what is disclosed and what might be in the mind of an investor.”

Kunnen and Perennial’s Brian Thomas echoed the call for a greater emphasis on disclosure.