To mods: please do not merge with other topics, I will do my best to provide an insight into capital flow in this topic rather than emotional discussions.
If the government is willing to let the country go broke to save the housing market from going down, then you can be sure of one thing and one thing only… this country will go broke.
I would not bet much on housing market though.
As forecasted here – https://www.ozbargain.com.au/node/694076 , the government(s) went ahead with Fiscal stimulus for housing market. I could not foresee the levels of stupidity though. It looks that the reported outlook is truly grim for the housing market.
I raised the issue that inflation will be even more money-tightening than the rate hikes, therefore we are in a “cash-splash” zone… again.
Following is a lengthy view for those who want to know more.
Let’s do the 2nd and 3rd level thinking about using super for home-buying. An appalling and ill-conceived idea even for a ScoMo’s government – this is the low of lows both economically and common-sense.
Next level thinking
When a person withdraws his super-fund money, this is not “just money”, this is a direct SELL order of assets – usually stocks and, sometimes, bonds (bonds had bad rap in the past two years, so most super-savers have moved into stocks).
So, by creating these economically insensitive sellers, the government have literally signed-off selling of AUS200 market. And this is considered to be “an event” in the money managed circles. Which means that all clear-thinking money manager will probably front-run this in the days of policy coming into life.
Therefore, we will see front-running selling, super-funds selling and momentum players selling a bit more after. If that idea catches fire, there will be hedge-funds just playing the idea of shorting aussie stocks especially if commodities boom is over. Suffice to say that returns on the ASX will suck for some long time.
Other players
Super-funs obviously will try to protect their returns and in response will invest more overseas, giving other countries so much needed liquidity and investment flows. They will try to reduce exposure to AUS market for new money coming in and re-think their hedging strategies, thus creating unnecessary complexity and increasing risks.
Most importantly, this will remove the floor from the stock market and any marginal selling will beget more selling with no-one standing the way of AUS market going down.
Companies might have troubles doing IPOs in AUS because they will be at risk of indiscriminate selling by FHB raiding their super. And not many dare-devils will want to list in the under-performing market. Which means that aussie companies will prefer to list overseas and this will remove the capital from AUS a bit more,
Secondary offerings (when a listed company tried to get more capital by selling additional shares) will also be in troubles due to the same reason.
All in all, raising capital in Australia’s public markets will become much more challenging and any new capital will prefer to go overseas.
How do you think this will impact the business climate?
How this affects you?
Well, you have money in your super, right? Your super is probably invested into Australian assets. You are screwed in terms of your super returns for years to come.
Also, you are probably working in some good place, right? Well, not so much anymore. One man’s spending is another man’s income. With supers raided to inflate house prices, there will be little appetite to put new money to work in Australia’s real economy. Good luck with that real GDP growth.
Start-ups, new initiatives, economic miracles, and next frontiers? Forget about that. Aussies proudly inflate housing market prices! I have already explained why in this topic – https://www.ozbargain.com.au/node/696260
The 💵 belongs to the fund until the customer can withdraw it.