Ann Pettifor

My tour of Australia – with the SEARCH Foundation

Read about my speaking tour of Australia below – from the SEARCH Foundation:

The SEARCH Foundation is currently touring eminent British economist and author Ann
Pettifor around Australia and she is visiting our shores with a warning; the GFC inducing credit
crunch is not over and Australia’s banking sector is vulnerable.

Ms Pettifor is visiting Adelaide, Sydney, Melbourne, Canberra and Brisbane for speaking
engagements over the next fortnight.

“Before the Credit Crunch of 2008-2009 Brits and Americans were convinced that the good
times could last forever. Our orthodox economists, central bankers and politicians encouraged
us in that delusion. Today millions of the unemployed, homeless and bankrupt are paying
a heavy price for the failure to understand the role of the private banking system in causing
systemic and widespread economic failure.” Ms Pettifor said.

“Australians would be well advised not to fall into the same trap.

“At the same time, the increased frequency of extreme weather events is challenging the
widespread delusion that there is no limit to the rate at which humanity can go on polluting the
atmosphere and looting the seas and wider ecosystem.

“Australians, who have suffered more from extreme weather events than we have in Britain
would do well to take the lead in warning the world of a widespread delusion: that there are no
limits to the rate at which we can consume and ‘grow’.

“Instead we all need to address the most urgent crises facing humanity: the continuing global
financial crisis (it never did end in 2008); the threat of peak oil; the threat of climate change;
and now the rising threat of food and water shortages. That is why we, at the New Economics
Foundation first proposed the Green New Deal in July, 2008.

“We argued then, and we argue now, that societies must first fix the out-of-control globalised
financial system. We must strip the Masters of the Universe of their mighty power – after all
they rely on the world’s taxpayers to guarantee their profits and bonuses, and to socialise their

“Only then can we put the domestic banking system to work to help finance the transformation
of the economy away from costly globalised finance on the one hand and dependence on
fossil fuels on the other. Instead, tight but low cost-finance, generated by our domestic banking
systems must be put at the service of the transformation of the economy.

“We need massive investment in sustainable, renewable sources of energy and in the
conservation of the ecosystem’s resources.

“The banking system must provide regulated, low-cost finance for that investment. Just as
the banking system of the late 1930s and 40s helped finance economic recovery from the ’29

Crash; and then the challenge societies faced in 1939: World War.

“Such a transformation – a Green New Deal – will require greater self-sufficiency, and the
localisation of economies as far as practicable. It will also require the training and recruitment
of a ‘carbon army’ of workers – skilled and unskilled – to turn every building into a power
station, and to make every building energy-efficient.

“But just as central bankers and politicians turned a blind eye to the looming credit-crunch of
2008, so now they are turning a blind eye to the financial and ecological threats facing society.

“For example, right now, Australia’s mining boom is masking the vulnerability of her banking
system – and the threats that both high levels of household debt, and instability in globalised
capital markets pose to Australian banks – and therefore to the economy.

“Despite Mr. Glenn Stevens’ sanguine approach to the stability of Australia’s banks in his
recent testimony to the Australian parliament, insurance against the risk of Australian banks
defaulting – credit default swaps – climbed nearly 50% over August. That means that investor
expectations of Australian banks’ defaulting are on the rise. In addition, the cost of raising
40% of Australian bank funding ($100 billion) in global capital markets has been rising as a
result of instability in the Eurozone and US.

“The rising cost of this integration of the Australian banking system in the globalised economy
invariably means that Australian banks – and the financing of the current account deficit – are
more vulnerable to the whims of global investors.

“And as a result of the falling confidence in global capital markets, interest rates on loans
to Australian businesses and households will rise too – at a time when their customers are
snapping purses shut; house prices are sliding as Australians slowly pay down very high levels
of debt; and mortgage costs have been ratcheted up by the RBA’s raising of base rates to the
highest in the developed world;

“No amount of iron ore is going to fix Australia’s financial system. Australia needs a Green
New Deal.”

For media interviews with Ann Pettifor whilst she is in Australia, please call Peter
Murphy on 0418 312 301.
Note to editors.
1. Ann Pettifor a fellow of the New Economics Foundation (nef) in London, UK, and director
of PRIME economics, is visiting Australia on a two-week tour, sponsored by the Search

Ms Pettifor first predicted a credit crunch in September, 2003 on launching a book she edited
and Palgrave Macmillan published: “The Real World Economic Outlook.” Later in October,
2006, Palgrave Macmillan published her book: “The Coming First World Debt Crisis”. Then in
a Times interview in 2009, she warned that “the worst of the slump is yet to come.”
2. In his recent evidence Mr Stevens of the Reserve Bank of Australia said: “Major Australian
banks report being offered substantial US dollar funding offshore on account of their relatively
high credit standing. In any event, their reliance on such wholesale funding is much reduced
from three years ago, with the large increase in deposit funding at home and slower balance
sheet growth.” And yet in May this year, Moody’s downgraded all four of Australia’s major
banks, as ABC reported at the time.


4 thoughts on “My tour of Australia – with the SEARCH Foundation”

  1. Hi Anne,
    I am a family man with 4 small kids. Is it a good time or bad time to take on more debt for a bigger house? What is your advice for the average Aussie with a home and mortgage? Should one work towards being totally debt free fast ? And buy gold ?

    In other words what should of the average person done, before the great depression of 1929, if one knew it was coming?

    You appear very smart and someone I would trust with my kids future. Sorry I missed your trip here, I saw you on the 7:30 abc show tonight.
    Why are the rich getting richer and the poor worse off. What can we do to fix this. Who exactly are the rich people, can they be identified in general .? Any advice would be great. If a CEO helps a company make billions , like Steve jobs of apple say, shouldn’t he be paid accordingly ?

    Regards Jamie

    1. Jamie…thank you for this…and apols for the delay in responding. I am not a financial adviser…..but my general advice to friends and family is to not take on too much debt at a time like this. That is because we are living through deflationary times (although it may not feel like that in Oz right now)…and in such periods, when central bankers and finance ministers apply policies that effectively ‘deflate’ prices and economic activity – the cost of debt rises. As things stand, my view is that interest rates in Oz right now are very, very high in real terms…and they are likely to rise higher, as Oz banks appear to be dependent on EU banks for funding…and the cost of funding has been rising. Banks will invariably pass on those costs to borrowers such as yourself. So in periods such as the one we are living through, it is my view that (for individuals, not governments) having as little debt as possible is a good thing. Gold is currently attracting funds, but mainly because of a great sense of insecurity everywhere – not because it is inherently valuable…..and I fear that we are currently living through a gold price bubble with the owners of gold talking up its price…In any case, it is a little late to be piling into gold…a bit like buying up shares in 2000…just as the bubble in those was peaking. I would stay debt-free and nurture your savings. In a deflationary environment the value of cash rises…because there is a shortage of it, and because so many are ‘de-leveraging’ – paying down debts, or trying to sell a property whose mortgage has become too costly…most individuals/households have more debt than cash, and are desperate to sell assets for cash. So cash, at times like this, becomes valuable…Now as someone that has had a family of big, boisterous boys..I know how tempting it is to increase the mortgage and buy a bigger house. But you have no idea how quickly time passes, the kids move on…and the house proves to be too big and costly to maintain….Just a thought for you to consider. But these are decisions for you and your partner….

      As to why the rich get richer? Mainly because they own assets (property/stocks and shares/works of art/yachts) against which they can borrow…which enables them to ‘leverage’ their wealth. And as banks were throwing credit around…the rich could do a lot of ‘leveraging’ – until they overreached themselves. Many went bust over 2007-9…but many many more managed to hold on to some wealth, especially as central banks lowered interest rates in the US and EU – which lowered the cost of their debts. The poor on the whole don’t own assets..and so cannot leverage. That is why I believe the rich got richer over this period…while the poor got poorer.

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