As MSQ Capital’s Managing Director Paul Miron sees things, we’re pawns to a rather significant economic experiment.
4 min
It is to the astonishment of most economists, politicians and property experts that we are experiencing an extraordinary V shape recovery.
This week’s fundamental economic good news is that the unemployment rate has fallen to 5.8%, smashing expectations. The property market seems to be booming, job adverts are increasing and consumers are now freely going back to pre-Covid-19 spending levels. Millennials are once again ordering smashed avocados whilst leisurely completing their online home loan applications in order to begin the hunt for their first property purchase. That debut purchase, mind you, is now mostly sponsored by the government’s extraordinarily generous schemes, such as ‘home builder’ ($2billion worth) and other various grants (providing up to $50,000 per person).
This is a far cry from expectations a year ago, when Prime Minister Scott Morrison sternly prepared Australians for a 6-month hibernation, followed by a high unemployment rate and a long and hard economic recovery.
Despite current positive economic euphoria, there are some very respected and seasoned investors, politicians and economists who are extremely worried — of the view that the economic recovery, both locally and internationally, is founded on fragile thin ice.
There is a high risk that both our local economy and international economies may generate inflation past the prescribed target of the 2%-3% tolerance of central bankers around the world. This would place the RBA Governor, Philip Lowe, under significant pressure to increase interest rates, despite his assertions that rates will stay put for at least 3 years.
Lowe’s motivations would be to avoid the undesirable economic and social impacts of hyperinflation, akin to past historical experiences that lead to the Great Depression of the ‘30s, the late ’70s oil crisis and the ’80s, where many people can remember living through official interests of 18.5%.
During the past few weeks we’ve seen a number of global central bankers — notably as those from Russia, Brazil and Turkey, among others — increase their official interest rates as their economies simply do not have the financial capacity to continue printing money as freely as our economy.
Increase in interest rates would put downward pressure on asset classes such as property and shares, whilst undermining consumer confidence — resulting in lower spending and impeding a full economic recovery.
The current unemployment trend would very quickly change from positive to negative. The most alarming comment is that both monetary and fiscal policies have pretty much been exhausted during the pandemic. Worse still, if the Government was unable to support the market, it could lead to a market collapse like the crashes of 1987 and 2004 and the various property market corrections we have experienced in the past.
The rationale for such divergence of economic opinion is fundamentally based on the fact that we’re living through an economic experiment. The combination of monetary and fiscal policy employed by the Government and RBA has never before been tested — think zero interest rates, Quantitative Easing, Job Keeper, Job Seeker and mortgage payments deferrals to name but a few.
Another way to appreciate this is via the below graph prepared by AMP. It demonstrates the hypothetical green line if Covid-19 had not happened. The blue line depicts actual GDP figures.
Despite Australia’s GDP being in excess of 3% for the past two quarters (for the first time ever), we remain 2.4% below than what we would have been if Covid-19 never arrived. Our unemployment was mid 4% pre-Covid, with wage growth peaking at a mere 1.4%p.a., whereas today unemployment sits 5.8%.
It is the RBA’s fundamental economic assumption that in order for inflation to shoot past 3% maximum traditional target, interest rates must be kept low and we require the unemployment rate to fall to 3%. This is because in the current economic situation, wage inflation is the key element to push overall inflation. According to many economists, it could take years for unemployment to reach a rate below 4% and which therefore supports the RBA’s expectation.
The estimated financial cost to future tax payers to ensure we have this V shape recovery is estimated to be circa $350b, roughly 17% of our GDP. This is 5 times larger than any stimulus that was provided during the GFC.
And so, despite the surging asset values, it is unlikely for the economy to suddenly overshoot the green line while a number of industries, such as tourism and international students, remain subdued (and let’s not forget those industries being targeted in our ongoing trade war).
The true economic recovery picture will be seen in the next two quarters of GDP figures, where either the fear of inflation will abate or crystallise into reality.
Paul Miron has more than 20 years experience in banking and commercial finance. After rising to senior positions for various Big Four banks, he started his own financial services business in 2004.
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A vibrant 1954 Palm Springs home featuring eight colorful murals by late artist Shawn Savage is on the market for $2.295 million. The 2,237-square-foot property features bold hot-pink doors, three bedrooms, a pool, mountain views and playful interiors blending modern glamour with classic Palm Springs style.
3 min
A bold 1950s home in Palm Springs, California, adorned with eight colorful murals by the late artist Shawn Savage, is coming to market ahead of the city’s annual Modernism Week.
The white stucco home on El Camino Way, built in 1954 and recently renovated, has an asking price of $2.295 million. Its staggered facade features three playfully abstract murals on either side of double-height hot pink doors.
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The sellers are Los Angeles-based partners John Freeman and Mathieu Faure, who knew it was “the one” when they saw it after several months of searching in the winter of 2023. “It’s a happy house,” Freeman said. “We really liked the feel of the house: the uniqueness, the openness, the brightness—and the art.”
Located in the Mesa neighborhood of Palm Springs, which backs up to the San Jacinto Mountains, the 2,237-square-foot house features three bedrooms, an angled bonus room and a yard with a pool, desert mountain views and another colorful mural running alongside the pool.
“I never thought in my life I would have a house with pink doors,” said Faure, a producer at Apple TV who is originally from Paris. “It’s so colorful, it’s so different. And so Palm Springs.”
The layout of the home creates a smooth flow from the front doors through the open-plan common area—a foyer, bar, and living and dining room—into the kitchen around a fireplace wall and out to the yard. A corridor leads to a private bedroom wing, where the primary suite has floor-to-ceiling windows and the primary bath is only a tad smaller than the bedroom.
Faure has filled the home with Jonathan Adler furniture, rugs and accessories, riffing on the energetic California vibes of the house to create an aesthetic of “modern American glamour,” he said.
“It was enjoyable for me to play with different types of furniture and make this house ‘happy chic,’ as I describe it,” he said.
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“He did a fantastic job,” said Freeman, who is an attorney and consultant. “It does kind of bring a smile to my face whenever I walk into the house.”
Since the furniture and decor were chosen for the particularities of the space, the couple is open to selling them with the home. Their West Hollywood house is already furnished; the collection doesn’t match the vibes of a Houston loft they bought near family; and Faure can’t imagine these pieces in New York—where he’s lived in the past—he said.
The duo bought the Palm Springs house for $1.925 million in 2024, according to property records, and will list the home Monday. They are represented by Stewart Smith, Patrick Jordan and Kevin Stanley of Bennion Deville Homes/Luxury Portfolio International.
The previous owners had purchased the home in 2021 for $975,000 and then spent more than two years and $700,000 on the renovation, according to Realtor.com. They commissioned Savage, a local Palm Springs artist and painter known for his joyful abstract work, to decorate the home.
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Savage, who died in 2024, lived in the Coachella Valley from 2003, and his work can be found in various local institutions and is on exhibit at the Illumine Gallery in Palm Springs. “Some artists pass through a place. Shawn Savage became a part of it,” the gallery’s description states.
Unsurprisingly, the murals invite lots of friendly conversations, as well as guided tours and interested lookers, but never to a degree that it disturbed the peacefulness of their home or the neighborhood, the sellers said. “It felt like living in an art gallery, and you have the exterior that you would share with the world,” Faure explained.
The neighborhood also played a role in their decision to buy, because of its access to the hiking trails of the San Jacinto Mountains, the lack of through-roads and the neighborly environment.
“It’s a very friendly place,” Faure said.
