LONG VIEW: Westpac treasurer, economist on markets, property

A year on from the COVID-19 market meltdown, Westpac treasurer Jo Dawson and senior economist Matthew Hassan discuss the outlook for the housing market, talk of bubble risks, the differences between the global financial crisis and the COVID-19 recession, the recent spike in bond yields and more. 

Some highlights: 

Matthew on… 

The housing market and his forecast for a 20 per cent spike in prices: 

“We are seeing already seeing very strong momentum in the market. The turnaround in prices over the last four or five months has been pretty clear and it's broadened and strengthened into the new year and markets are very tight… (there’s all the) drivers for very strong demand for housing.” 

Bubble talk: 

“I think the talk is premature right now. We are still in a recovery phase four for most markets and in most cases, prices of regaining lost ground…we're also seeing very benign investor activity…I think those risks around financial stability are actually really low right now.” 

Risks to his house price forecast: 

“We were previously a little bit concerned about what the end of mortgage repayment holidays, how that would challenge the market. I think that's a much more minor concern. I think the more pressing issue now is really whether if we were to see a longer period of weak net migration inflows, then that could pose problems in maybe two or three years time.” 

Jo on…

The spike in bond yields: 

“Expectations have increased for economic growth and for inflation and you've seen a shift higher in terms of global bond yields… I think the market's trying to certainly test out what what's happening here in terms of the overall yield curve…but I think it's important to note that central banks, and particularly our own central bank, have really focused on the fact that they will retain rates at low levels for an extended period of time.” 

Liquidity: 

“The response to COVID that central banks around the globe came out with certainly has taken liquidity off the table as an issue for banks and the banking sector.” 

Comparisons between COVID and the GFC: 

“I think from a banking system perspective, we came into this period much stronger than what we came into the GFC. So this is quite a different experience from that perspective.” 


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