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Tom Scollon
Chief Editor
The economic clock is ticking. Slowly. It stops for no man or woman.
In my book ‘Fair Share’ I refer to the economic cycle as the economic Ferris wheel because it is a bit of a ride.
We have experienced the peak in property prices and now we are seeing a decline. The decline is real though many would like to think otherwise.
We are now seeing banks and mortgage houses competing head to head, offering reductions in both fixed and variable mortgage loans. It may even be attractive to lock in some fixed rates.
Soon we will see the peak in the share market. It may be a few months before it finally winds its way to the top after what will be a three year haul. And yes, then the inevitable happens, the markets start to come off. Just like property.
You see, cycles repeat themselves. It is just that people have short memories.
How can I be so sure? Well inflation is just around the corner and that is what drives the speed of the clock. Right now many would say we are in good shape but as night follows day inflation will follow an economic boom.
We can see the evidence all around us. Oil prices will remain at overall steep levels for some time and record resource prices will eventually bite as so much of our durable purchases – computers, cars, white goods - you name it – comes out of the ground. Soon consumers will reduce consumption in retaliation against prices that have pushed too high.
The other major component of the cost of production is labour. We are now seeing hard evidence that wages are rising.
Inflation will stop us in our tracks – but that does not mean we have to be gloomy as ‘busts’ can be short-lived. But it is good to know what is ahead.
Enjoy the ride.
Tom Scollon
Chief Editor
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