Article from SMH re Kosiuszko bet

'Rate cut Rory' bets his boots on house pricesNovember 28, 2008
An academic predicting a collapse in house prices has made a bet with Macquarie Group economist Rory Robertson that commits the loser to walk from Canberra to the top of Australia's highest mountain.

A forecast by University of Western Sydney associate professor Steve Keen that house prices will collapse by 40%, double the current plunge in the US, has a 1% chance of being correct, Mr Robertson said today.

Mr Keen, who made headlines in Australia and overseas with his forecast that the nation may be facing a depression, and last month sold his inner-Sydney home, accepted Mr Robertson's challenge.

If house prices fall by less than 20% he will embark on the 230 km hike from Canberra to 2228-metre high Mount Kosciuszko.

"Moreover, the loser must wear a tee-shirt saying: "I was hopelessly wrong on home prices! Ask me how,'' said Mr Robertson, dubbed "Rate cut Rory'' after accurately forecasting the central bank would cut rates in 1996, betting against the market.

"I expect to record an easy win within two years,'' Mr Robertson added. "That's because falls in Australia-wide home prices will be limited by our lack of overbuilding, our much more disciplined mortgage market, and especially, the Reserve Bank's ability to drive mortgage rates lower.''

RBA Governor Glenn Stevens has cut the benchmark lending rate by 2 percentage points since early September to a 3 1/2-year low of 5.25%, the biggest reduction since a recession in 1991.

The RBA is widely expected to reduce the overnight cash rate target by at least half a point when it meets next Tuesday.

The decline in house prices will be measured using Bureau of Statistics figures starting from the second quarter of 2008, "peak to trough,'' Mr Keen said in a telephone interview.

"That could take 15 years,'' he added. "I've got a feeling I'll still be fit enough and I hope he is.''

While Mr Robertson said he "never says never,'' Mr Keen's forecast of a 40% drop in Australian house prices "effectively requires a meltdown'' of the nation's financial system.

Australian house prices fell 1.8% in the third quarter from the three months through June, the biggest decline since 1978.

Household debt has almost doubled since 1999 to around 160% of incomes, a higher ratio than in the US and UK, according to AMP Capital Investors. The median national house price soared about 140% in the same period.

Bloomberg