Chart Of The Week: The 'SCANNZ' Economies

Pondering the Probability of Echo-Crises:The MT4 platform crmSCANNZ economies (Sweden, Canada, Australia, Norway, New Zealand) share an interesting set of common features e.g. small open economies, exposure to commodities, have their own currency, independent central bank, and of course they all have overvalued housing markets. And these commonalities are important…

Because of their sensitivity to commodities, the central banks of the SCANNZ economies cut interest rates during the 2014-16 commodity crunch—which drove their housing markets higher. Then of course, 2019/20 saw another wave of rate cuts and another wave of house price appreciation… and left these economies with a significant vulnerability and sensitivity to a significant increase in borrowing costs in the form of record high housing market valuations.

The problem is this risk-scenario appears to be exactly what is getting underway right now, with rate-hike lift-offs spreading and bond yields up substantially off the lows. We probably don’t see ‘systemic stress’ like what happened in Europe with the “PIIGS economies” during the sovereign debt crisis (which was basically an echo-crisisof 2008), but you could easily see *simultaneous* stress across the SCANNZ economies if a similar kind of echo-crisis were to be triggered by bursting housing bubbles.

SCANNZ Economies Residential Property Market Valuations

Key point:Expensive housing markets leaves the SCANNZ at risk of an echo-crisis.

Statement: The content of this article does not represent the views of FTI website. The content is for reference only and does not constitute investment suggestions. Investment is risky, so you should be careful in your choice! If it involves content, copyright and other issues, please contact us and we will make adjustments at the first time!