Economist puts dent in optimism: bigger crash is coming -
An international economic forecaster says another big crash lies ahead for global share and property markets within the next two years.
Harry Dent predicted the Japanese recession in the 1990s and also forecast the current global financial crisis.
He has told ABC News Breakfast that the Australian share market will continue to make gains during the next few months, before bottoming in about 2011.
"I'd say maybe the Australian All Ordinaries will get back up near 4,500, the Dow maybe close to 10,000," he said.
"And then you'll see another crash late this year and into next year, as banking systems melt down again. I think the next one's going to start in Europe and Eastern Europe, housing prices would lag.
"I think stocks are going to end up down 60 or 70 per cent before it's all over, and I think housing prices in Australia will probably be down 40, maybe 50, per cent, maybe more than that in the United States and Europe."
Mr Dent says the driving force behind the renewed slowdown will be the reduced spending of an ageing population: a similar malaise to the one that has affected Japan since the early 1990s.
"Peak spending is age 46, so we've been saying for decades, we're gonna have this great, great boom and then around the end of this decade baby boomers are going to peak in spending, prepare for retirement, kids are going to leave the nest and the economy's going to slow just like Japan did in the 1990s," he said.
"Japan has already gone through a housing bubble, and a peak in generation spending, and you know what? Their stock market declined for years, housing declined 60 per cent, and all the government stimulus could not put Humpty Dumpty together again - that's what we're looking at."
Mr Dent says home owners and prospective buyers should look at the Japanese property bubble and bust to get an idea about where prices might head.
"Bubbles usually go back to where they start... in Australia, I'd look at my real estate and say 'what was it worth in the year 2000?' that's when the housing bubble started," he said.
"They have to go back down to where young families can afford a house again, so that's a good thing."
Australia the place to be
Mr Dent says the news is not all bad: he says the greatest boom in human prosperity followed the Great Depression and World War II and the world can expect a similar period of growth once all the bad debts and devaluations work their way through the financial system and economy.
He also says Australia is the best placed Western nation to weather the worst of the recession.
"If I had to sit out the depression in one place in the Western world, it would be Australia," he said.
"Your demographic slide is less, your immigration's been stronger and you're on the edge of China and India - they're not turning down due to baby boomer demographics, they've got much growth ahead."