Rob O’Byrne talks to Harry S. Dent about his book The Demographic Cliff. Harry has some slightly better news for us in Australia.
Hi this is Rob O’Byrne and today I’m talking to Harry S. Dent! The renowned famous Futurist and Economist, not sure which one he likes to be called but probably more on like an Economist. And we’ve been talking over lunch about his book ‘The Democratic Cliff’ which can be a bit of a panic read for some people, I think. Harry, you were telling us over lunch that the Australians, there’s maybe not quite so much drama in the future because you were talking about the wave being not so bad.
Harry: What we have is a baby boom generation around the world in different times, starting to Japan, then the US, next is Europe. Peeking and turning down in a big generation and it’s a big demographic decline, so we’re not out of this Global Financial crisis yet. Australia doesn’t have the Demographic problem than others because of the high immigration. Your demo graph goes sideways for spending for the next decade and then goes up – one of the few developed countries in the world has that.
The challenges I see for Australia are two things: ‘Resource Prices’. You’re a big resource exporter and those prices are coming down and we have a cycle in the book that shows why they peak and why they continue to edge down for a decade – that’s a very good cycle.
The second thing that’s bigger is ‘The China Bubble’. China is the biggest bubble in the world – real estates, over building, over development, pushed by governments, way over of demand – I mean over a decade ahead of demand. Yes! They’re moving from rural to urban but if we looked at that they’re way over built. I see that as the biggest bubble to burst in the world and that will be the biggest impact on Australia. Your biggest trading partner and affects the whole Pacific Rim region, if you have your own island you wouldn’t have much problem ahead.
Rob: You mentioned in your book the over value of real estates and when it gets to – is it 10x earning something like that and the bubbles is likely to burst and we’re about 10, is that going to happen to Australia?
Harry: Yeah, Australia is like California because the rest of the country is different. The bubble in the US burst when California gets the same evaluation as San Francisco, and LA and Vancouver and Canada, London is the only place more expensive than Sydney and Melbourne and the developed world. So yes, this real estate’s bubble around the world is something unique. This never happened before and that is the baby boom generation is larger than the generation to follow in most countries except Australia. And when a smaller generation follows, you get a point where more people are dying than young people buying real estates and demand is already getting negative in Japan. It will go negative in the US in about 15 years, it will slow in Australia but it won’t even come close to negative – so you guys are very more lucky on the demographic side.
Rob: That’s great! I know you’re going to rush on a plane but I really appreciated the discussion over lunch and I guess explaining some the ‘not so stiff cliff’ here in Australia. Thank you very much.”