Some people might remember Steve Keen’s bold prediction about the collapse of the housing market. Now he is in a right pickle. The Charles Sturt (property) newsletter reports.
Sixteen months ago Mr Keen made a bet with Macquarie Group interest rate strategist Rory Robertson after claiming that house prices would dive by 40% when the GFC was at its worst.
Fortunately his predictions didn’t eventuate, and now Mr Keen will deliver on his promise to walk 224km from Canberra to the top of Australia’s highest mountain, Mt Kosciuszko. It remains to be seen whether he will wear a t-shirt saying “I was hopelessly wrong on home prices! Ask me how.”
Dr Keen was way off the mark. Australian home prices bottomed out by 5.5% from their peak in late 2008.
Dr Keen also predicted Australia would have double digit unemployment for the next decade. Well, according to official data, the jobless rate fell in January to 5.3%. Dr Keen said recently the jobless rate was now likely to stay in a single-digit figures as the Government went into more debt to stimulate the economy.
Not only that, Dr Keen forecast zero interest rates. And as we saw, the Reserve Bank raised the cash rate three times in late 2009. Over at Macquarie Bank, Rory Robertson said the large interest rate cuts in late 2008 and early 2009, combined with the Federal Government bank guarantees, helped prevent a huge drop in house prices.
But we haven’t heard the end of it. Dr Keen says the bet is only lost for now, because a temporary doubling of the first home buyer grant stabilised home prices. He says his forecast could still come true by 2025.
For now, the 57-year-old academic and tri-athlete will walk the 224km from Parliament House in Canberra to the summit of Mt Kosciuszko. Dr Keen has been a runner since he was 12, and he’s been preparing for the trek by running and lifting weights. He plans to cover 30km a day, between April 15 and April 23, and donate the proceeds to charity Swags for Homeless.