Get ready for downturn - Bagrie
The world is due for another bad economic downturn so people need to be aware of the signals, warns ANZ’s former chief economist Cameron Bagrie.
Friday, February 16th 2018, 11:35AM 
1 Comment
by Miriam Bell
Bagrie, who has just launched his own research consultancy Bagrie Economics, says the world economy might be doing OK but its structural indicators don’t look great.
“There is more debt and less growth now than there was in 2008, before the global financial crisis, and, in New Zealand, there is weak productivity.
“While inflation remains low, that is likely to start changing and, once it does, interest rates will start creeping up too, which spells the end of the cycle.”
Statistically, we are about due for an economic downturn as bad economic times tend to happen every 10 years towards the end of a decade, he says.
“People need to be aware of the signals and just start being a bit more cautious.”
Long known as outspoken, Bagrie says consultancy will give him greater freedom to address issues, such as the global economic outlook, in a way that he couldn’t in his previous market-focused role.
That includes speaking out on public policy issues like housing supply and the retirement age, as well as providing boutique economic commentary and analysis to clients.
But it will also give him the chance to fill a gap he sees in the financial advice industry for independent economic analysis.
In Bagrie’s view, this particular gap in the market is set to become more pressing given the legislative changes facing the financial advice industry.
“There are a lot of advisers out there who need an economist for about 10% to 15% of the time but not full time; who need some economic analysis but don’t want to wear the cost of a permanent economist.
“At times like last week’s global share market turmoil, many advisers would benefit from independent commentary and advice on what is going on and what it means going forward.”
Further, the greater professionalism which will come with the Financial Services Legislation Amendment Bill means that advisers will be demanding more solid, independent economic advice, he says.
“Advisers will need to be squeaky clean and spot-on in the advice they are giving. There will be a lot of pressure on those in the industry to do what it is legislatively specified they are supposed to do.
“Yet, at the same time, advisers will have to provide something different to everyone else – because that’s what their clients are looking for and what will make them stand out.
“In many ways, it will be all about trying to deliver economic intelligence to the clients of my clients.”
While there are other economic consultancies at work in New Zealand, Bagrie says he can provide something different.
“I have financial markets experience and to understand the ins and outs of the economy you need to understand the markets.
“Advisers have to support their customer base with such information and that means they are permanently searching for information to do so. And that’s where I can help.”
Bagrie, who is based in Wellington, worked for ANZ from 1999 on and was the bank’s chief economist for 11 years until his departure in late 2017. Prior to joining ANZ, he worked at Treasury.
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This warning by Cameron is one mimicked by myself, and one that I distributed myself late last year, in writing, so that no-one can suggest that the message was given 'after the horse had bolted!'
The debt situation is a main root behind the looming problem.
eg; The 'big five' USA banks will not be in a position to be the 'saviour-bailers' like in the GFC, because their 'asset' base is overloaded with derivatives, with a value much higher than their host country's GDP.
It is a huge 'story' behind the looming 'correction'....
...clearly a bigger story than a 'comment' box can provide. Watch this space, as I assume Cameron will elaborate when due.
Meantime, have a look at an interesting 'clock' to help put things in perspective!
usdebtclock.org
(And look at other 'world' clocks)
And remember to describe a Trillion not just in how many zeros,... boring.
Describe it as...counting at the rate of one-per-second, 24/7
It takes more than a few months.
It takes 36,000 years, to count to just ONE trillion.
I shall (for one) keep an eye on Cameron's 'space', becaause it has been cemented in writing.