Wow, the Office of Budgetary Responsibility (OBS) gave one of their predictions as a 35% drop on the same day others predicted 13% with a bounce. Is it possible, likely or a foregone conclusion?
Will these fuzzy numbers really affect you and me?
For all Brett’s Coronavirus resources https://www.gladfish.com/covid19/
Hey guys how is so is a thirty five percent drop into recession really likely that’s one of the predictions from the Office of Budget Office of budgetary responsibilities which is basically what that was set up it was set up as an independent parliamentary body to fact-check effectively and to come up with ideas of what actual things across some when they have a policy what used to happen was he would introduce policy and you would put all the numbers to it and oftentimes the numbers were just absolutely rubbish so they introduced this independent body that when the policy was introduced they would say now this is not a prediction it’s a possibility but it’s one of a number of possibilities and it’s interesting it’s clearly it’s an independent body because it’s got Ritchie’s backup and understandably so too because you know it’s it’s a headline-grabbing thing now yes if you have an extended period of time where we’re shut down things are having I would say there’s gonna be a thirty five percent drop but I’m not so sure that that’s gonna be the case and I think you know it’ll be interesting.
But anyway you guys will get started so I’ve changed the format today I’ve got rid of all the stuff at the start about the coronavirus the numbers and the recoveries and Alessa stuff I think we’re now reaching the top and I think for realistically you know it’s a spare thirty seconds two minutes that you can actually get back now and so what I’m gonna do is just focus on the subject at hand so if you’re disappointed about that sorry but you know just go to the water meter site and you’ll see all the information there it’s a great site they’ve been keeping up to date either that or John Hopkins but yeah.
So let’s get into it so thirty five percent drop so the OBS thirty five cent drop it is one possibility that’s interesting I this with brexit the Bank of England come out and said my thirty you know the third drop in house prices was patate possible but you know when you realize what these guys do is they have very smart people who deal in lots of lots of numbers and they put a model in and anytime you hear a model yeah you’ve got to think well what are the assumptions okay and when you look at the assumptions and the assumptions are never in the headlines the assumptions are in the detail buried deep in the detail because what you then do is oftentimes you’ll come up with a model you come up with assumptions and based on those assumptions you run the numbers and you come up with 35 percents so depending on what those assumptions are we’ll determine on what the outcome is it may be totally unrealistic now obviously they’re paid to get things done but oftentimes when you look at these things what they have is a fan chart so I have the worst to the best and somewhere in between you know.
The interesting thing is in my experience across you know and now 25 years I’ve been you know doing this sort of stuff of more than 25 years in fact and virtually in every case I don’t think there’s a single case yet where the headline 35 percent which is the lowest of the low has ever come to pass yeah and I agree with Mishi because in the same day there’s also talk of 13% drop okay which i think is much more I mean there look there is going to be a drop do I think we’re in the recession I think we’re in a recession are we technically in a recession because there are two negative quarters no we’re not but let’s face it you don’t stop an economy don’t lock down I mean like this without you know the GDP dropping without lots and lots of things being you know slowed down and because of that I think you know whether technically or not we are in a recession the question is not about we’re in a recession now or not the question is about are we going to rebound out of it and so a lot of the models are talking about a rebound.
I’m in two minds here with this because I think is 35 per cent likely no I don’t think it’s likely okay I think the government is doing everything it can and I think it will do and I think it’s just actually starting to get now if you think about it a modern economy post-world war II and really the 70s you know we’re talking not just world war II well after that you know modern economies started using monetary policy and fiscal policy monetary policy is the raising love interest rate and the injection of effectively quantitative easing the injection of currency or money printing money.
Fiscal policy is how the government does things through taxes and through incentives and signals okay and borrowing and all those sorts of things so you know that the modern economy when it first started out the seventies ish you know give or take and you know we can get into another argument about that we didn’t really know what was going on we didn’t really know how to stimulate and we didn’t really know the repercussions both short term and long term but now we’re starting to get a sense of that starting to get a sense for how much money we can actually print how we can run inflation you know a little bit of inflation is good for an economy you know too much is bad you know how deflation is not good you know so all these sorts of things we kind of get a sense of that now and actually the governments around the world are starting to get this.
Now you know the reality is are we likely to get a 35 cent no I think it’s much more likely that we’re going to have a 13 percent drop if you like it might be 15 and might be 17 I’m not saying if I’m not making me to a figure I haven’t run the numbers and to be fair I’m not really going to from my estimation right now is the economy is not pretty you know on pause so might as well be zero it’s not but the interesting thing with this is that I find that the question is about the rebound and right now the rebound is anyone’s guess and I’ll tell you why I think we potentially can rebound and why the government will is there to rebound and the Bojo Andrea show is actually going to make sure we have a rebound okay is because if they get a rebound then they can be you know forgiven and actually I’ve done really well to get us in and see us through this period then if they can get the rebound they were looking really really good now then the issue and the third issue then which we’ll start talking about down the track once we know how the rebound went is how do we pay for all this additional debt this additional borrowing isn’t going to be and how much actually do we need to pay with and how much gets inflated away and and these are the things cuz they’re you know they’re serious questions and there’s a lot of money being spent right now that at some point someone has to pay for it and who normally pays for it, unfortunately, it’s the savers and generally, they are the elderly the pensioners that you know the people who invest in you know pension funds and things like that you know who generally pay because it devalues their wealth that’s what it does you know through devalue in the currency because you’re spending or printing too much money you know and that pretty much is how the government pays back debt is by inflation.
Now will we go on to a gold standard things like that’s another whole subject but I don’t think there’s anything to worry about 35 per cent and even if we do drop 35 per cent the reality is we can peg that back relatively quickly because of the things that have been done now to keep the unemployment rate down now do I think that the unemployment rate rise when we have to go back in year I do I think the government incentives are masking a lot of issues with businesses that are gonna have to be faced you know and and I know lots and lots of businesses and I’m chatting with lots of lots of guys and you lost lots of opinions right now and some of them are saying you know what it’s great but the government did this but the reality is I’m not sure I can’t see how we’re gonna come out of this you know unless the government’s gonna fund us for the next six months to get the ball rolling again so there there’s a lot of questions to be asked yeah and a lot of issues to be faced and it really depends on the commitment of a government but it certainly seems there so I think that’s a good thing and you know so yeah great great news you know in some respects that we’ve got a government they’ll do that.
I’ve just recorded a video in Queensland where the you know the state the state primary our president prime minister state that cool bloody hell premier sorry the state premier has basically gone okay tenants and landlords you can afford it so it’s your problem to deal with the tenant but the tenant gets all these additional rights a landlord gets none and sort of that much yourself and if you cancel then we’ll come it will go through a conciliatory process and pretty much you’re gonna lose you know landlord thank you very much and oh by the way there is a little bit of a provision there if you know worst comes to worst the government will put some money in you know and it’s kind of like not the government’s problem.
You know my understanding of government is that they’re prepared for things like this that they step in in circumstances like this you know so you don’t have to fund this it’s not the way to run a government you know so and the UK government is doing what they should do and functioning as they should, the US government isn’t you know the Australian I mean if a government is didn’t start it that way but it is now but the individual states you know we have a three-tier system federal state and local and certainly state for Queensland that doesn’t look very good.
But anyway you guys look I think for now things are looking pretty good on the economic front not talking about you know it’s horrific what’s happening with the virus and the human cost and that but in terms of the economics and in terms of us as property investors you know actually things are as best as they could be I mean that may turn this month when rents you know we’re getting a lot of people and rents in if you want to govern to my www.gladfish.com/covid19 site and check that out because that has lots of videos about the actual impact and the actual you know impact from tenants and landlords so did a lot of information on there if you need it you know daily videos all that stuff and all the previous videos from the coronavirus and property investment series alright guys have a great day stay safe stay healthy and stay at home and we’ll see you tomorrow