Speaking to InvestorWeekly, AMP Capital chief economist Shane Oliver said that along with other commentators, Mr Dent’s view that Australia’s economic prosperity is aligned to China is misguided.
“A lot of commentators seem to have this view that Australia is just a China story,” Mr Oliver said.
“But the China story has been fading for a while now and yet the local property market has actually picked up,” he said.
“I think the real issue driving property outside of Western Australia has been interest rates.”
Mr Oliver’s comments come after Mr Dent told InvestorWeekly that while most countries will experience a demographic-driven downturn within the next five years, Australia’s woes will be a direct result of its ties to China.
“China is the biggest bubble I have ever seen,” Mr Dent said.
“If Australia was left to its own demographics and trends it wouldn’t have a big downturn on its horizon,” he said.
“But China is your biggest trading partner; it is the centre of this entire region so it affects all of your other trading partners in the entire region over here.
“China is overbuilding everything, pushing uneducated people from rural areas to urban, thinking one day hopefully they become consumers and having them build stuff for nobody…this is crazy stuff.”
While it is relatively harmless for this stimulus to occur at a certain rate, the Chinese are “overdoing it”, Mr Dent said.
“Price to income ratios in Chinese major cities is 30 times income,” he said.
“By comparison, they are 10 times in Sydney and Melbourne, the same level where California peaked and the bubble burst.”
Mr Dent said the only cities still bubbling are those where foreign buyers are dominant.
“I think the China bubble is going to burst,” he said, adding that the rich Chinese keeping the Australian economy going are beginning to flee.
“Japan was burst by high prices and a demographic downturn, Germany is going to be hit by that, the US bubble got triggered by demographics.
“Not for Australia – it’s your trading partners in your region, especially China.”
But Mr Oliver believes commentators such as Mr Dent miss the fact that the property boom in Sydney, Melbourne and much of Australia actually started in 1995.
“Prices surged in 2003 – which was the real property bubble – and a lot of those cities have just been wallowing around ever since and occasionally moving up and down,” he said.
“The China boom was only instrumental in driving the boom in Perth.”
Despite what his critics may say, Harry Dent was an accurate forecaster prior to the GFC, Mr Oliver said.
“He foreshadowed the surge in the US share markets in the 1990s,” he said.
“Only in 2009 did he put out a bearish book.”
The bearish book – The Great Depression Ahead (2009) – predicted the US market would peak in 2007 and that 2012 would see the worst downturn since the 1930s.
The Great Depression Ahead was actually written during 2007/2008, according to Mr Dent, who says his predictions would have been realised were it not for one spanner in the works – government stimulus.
“That was a curveball,” he said.
“In addition to just lowering interest rates, governments said ‘For every decline in assets, we’re just going to put money in. We’re not going to let it happen’.”
For Mr Dent, government stimulus is avoiding the inevitable.
“It means young people around the world have no chance in the future if the economy remains artificially inflated and cannot naturally reset,” he said.
