Just to put everyone in the complete picture,tis is a short summary of everythig mr Chancellor said,,,his words reflect my beliefs,and seem to mirror my thoughts 'as a businessman' of what was about to occur around the beginning of 2007 in the UK.
I am not a doom and gloom merchant,just a realist....... read on!
He described Australia's banking system as a "cartel" and said luck rather than skill had allowed the Australian economy to fare better in the global financial crisis than other developed economies.
He attributed Australia's "luck" to a comparative lack of competition among local banks, enabling them to avoid much of the reckless lending that occurred in the US, as well as the commodities recovery led by China.
"My view is Australia had a private sector credit boom just like the US and the UK and it had a real estate boom," he said.
"Those are the facts and you can't paper over them.
"In this environment, house prices rose last year and that seems to me to actually have exacerbated the problem.
"The problem is the bubble and that hasn't gone away."
A key area of concern for Mr Chancellor was first-home buyers. As interest rates rose, the ratio of their mortgage repayments to their income would rise to very high levels, he said.
"It's the rising interest rates, particularly with real estate bubbles, that tend to generate the collapse," he said.
Another potential trigger was China, particularly if the demand for iron ore, coal and liquefied natural gas were to collapse.
"We would see the Chinese demand for Australian commodities as being potentially vulnerable," Mr Chancellor said.
He said he expected the negative news in Australia to come from "the housing market falling under . . . the sheer weight of its overvaluation and lack of affordablity" and a "terms of trade shock".
Everyone referred to Australia as the lucky country, he said. "I think that's pretty apt."
However, "given the great growth in private sector credit and the vulnerability of the housing market . . . Australia is not out of the woods. It hasn't even entered the woods."