Government action is staving off 1930s-type depression
While we'll be facing tough times ahead, things are radically different to the Great Depression era, said a leading Australian economist.
Speaking at the Conference of Major Superannuation Funds (CMSF) on the Gold Coast, Dr Shane Oliver, AMP Capital Investors' chief economist, noted the quick fall in interest rates, government guarantee deposits and the immediate fiscal stimulus packages as signals that we're not going to experience "a rerun" to the 1930s. The swift policy action globally and in Australia will head off a 1930's-type depression, Oliver said.
"The easy credit environment has changed fundamentally," he pointed out.
"Shares are providing great long-term opportunities," he told delegates. "The dividend yield in Australian shares is well above the bond yield."
As for dealing with the fallout of the crisis, Oliver said it's the "end of the financial era" and easy gains, and that we're likely to see more regulation and government intervention, an increase in savings, and greater macro volatility.
He noted investor scepticism in relation to shares and thinks we'll be heading back to basics in investing.
"I think Asia is the place to go in the future," Oliver said, arguing they don't have the same debt issues affecting Anglo countries.
"Strong Asia versus weak Anglo countries," he noted in his presentation.
He said debt, deleveraging, and not saving enough were at the core of what led to the financial crisis.
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