Economist David McWilliams has told the Lansdowne Club that it ‘screams to him’ that Australia’s housing market is overvalued.
The economist and broadcaster addressed the Irish business network at the Sydney Convention Centre on Monday.
“Property booms are never driven by supply and demand – they are driven by credit. And credit is the pretty hand-maiden of debt,” he told a room of about 300 people at the ticketed event.
“It screams to me – running naked down Darling Harbour – that this property market is overvalued,” he said.
However, he added a number of caveats to his assessment.
He said Australia was “flamboyantly abundant in resources” and that he would have made the same observation about the Australian property market at any time in the last six years.
In a 40-minute speech to the Irish business network, McWilliams argued that Ireland is losing credibility by pursuing austerity.
The policy meant Ireland had effectively become a ward of Germany, he said.
“Rather than negotiate on behalf of the people, they [the government] are negotiating on behalf of the others,” he said.
“In Ireland, we are negotiating in order to make Ms Merkel feel good about herself.”
McWilliams said a “destructive internal dynamic” has developed within Ireland, which has led to an acceptance of austerity.
He likened the spread of such acceptance to a virus in a crèche.
He said it was clear to him that Ireland’s mortgage debt presented a growing problem.
“I believe we will see mortgage default not because people want to but because people simply cannot pay,” he said.
Engaging with the audience in a question and answer session, McWilliams told the event “austerity on austerity is a bit like putting an anorexic on a diet and expecting them get stronger.”
Ireland was still struggling to define its own reality in the face of the economic crisis, he stressed.
It has, he argued, split into insiders and outsiders, with the former desperately trying to maintain their grasp of control.
“[In Ireland], people are rewarded for failure, and penalised for success,” he said.
He cited the National Asset Management Agency (NAMA), the State’s “bad bank”, as an example.
It was set up in late 2009 to take control of toxic loans from beleaguered Irish lenders.
“NAMA for me is a gravy train for an insider class that were involved in the crash,” said McWilliams.
He said many of the accountancy and legal firms that had serviced debt-ridden banks were now providing the same services to NAMA and he claimed it had amassed expenditure of €3bn in professional fees.
Asked what could happen in the event of a breakup of the euro, he predicted that Ireland could be the last to leave the monetary union.
He described the euro as the single biggest threat to the European Union.
Greece was being turned into “a financial Gaza Strip” by the continent, while Spain would be unlikely to remain competitive whilst in the euro.
The Irish Echo was a sponsor of the event.