Mint chair warns of debt growth bubble

Gold Corporation chairman Don Mackay-Coghill has launched a broadside against the loose monetary policy of central banks in the past decade, warning it has inflated a big bubble.

Speaking at the Precious Metals Investment Symposium in Perth today, Mr Mackay-Coghill said growing debt, particularly in Australia’s case associated with mortgages, would be difficult to unwind.

It comes after the latest data from consultancy CoreLogic showed median house prices falling in Australian capital cities in the year to September 30, with Sydney suffering the biggest drop, down 6.1 per cent.

A rise in the official cash rate from a record low level of 1.5 per cent could contribute to further tightening in the market as lending becomes less available.

“The nation's love affair with interest-only mortgages is coming back to haunt it,” Mr Mackay-Coghill, a previous chief executive of the government-backed mint, said.

He said it was not just Australia where debt had grown.

“Unprecedented low global (interest) rates encouraged a spree of public and private debt accumulation,” Mr Mackay-Coghill said.

Global debt was $US237 trillion in 2017, he said, which was more than quadruple global gross domestic product, while in developed markets, the debt/GDP ratio was even higher.

It is worth noting that GDP is a flow variable, measuring activity over time, while debt is a snapshot, so is more readily comparable to asset values or net wealth.

“Some attribute today’s destabilising excesses and asset inflation to the very central banks whose job it is to manage it,” Mr Mackay-Coghill said.

“Central banks had a little help from hedge funds, the wolves of Wall Street and the shadow banking system.

“They say that those who fail to learn from history, or in this case can't remember what happened in 1987, 19997 and 2008, are doomed to repeat it.

“Does anyone doubt that today’s mega bubble will burst?”

Big find

Toronto-listed junior miner RNC Minerals had a positive story at the conference, unveiling two massive gold nuggets found at a mine near Kambalda.

The two nuggets were part of a find with a value of $15 million, with the largest weighing in at about 90 kilograms.

They were uncovered at the Beta Hunt mine, a site initially exploited in 1966.

Now, the mine is subleased from international producer Gold Fields by RNC via its subsidiary Salt Lake Mining.

The rocks were discovered in September in a vein about 500 metres below ground.

Further nuggets were found later that month.