Are we in for another GFC? Will interest rates soar? Is Hanson crazy? I asked this economist

Richard Yetsenga is the chief economist of the ANZ Bank. He refuses to be alarmist about the global economy, but he does sound one big alarm. I spoke to him this week.

Fitz: Richard, I know you as my friend, but much of the world knows you as the chief economist of ANZ. How did you get to this weird world, where you can not only make sense of the endless blizzard of numbers, but presumably enjoy doing so?

RY: Happenstance. I fell into a commerce degree in the late ’80s at Griffith University, that was just starting to make a name for itself in Brisbane, and halfway through the first year, through a process of elimination, figured economics was about the only thing I really wanted to major in. And look, I quite like the numbers side of economics, but I don’t love it. I like the fact that economics is about trying to understand human behaviour in aggregate and what motivates people.

Fitz: Is your specific job to be up on the bridge of the institutional ship with your binoculars in hand and telling the skipper CEO, “Iceberg ahead on the starboard quarter, so steer nor-by-nor’east?”

RY: I don’t think I’m on the bridge. I’m probably manning the galley behind the bridge, making sure everyone has the right sort of sustenance and is being considered, about what’s going on. When I speak to the bank’s customers, I think of my role as trying to help them make decisions. If I can leave a meeting having helped someone understand their own business and the strategic environment in which it operates, then I’ll give myself a tick.

Fitz: Your tick from us will come if you can give us the good oil on interest rates , but we’ll get to that. From here on, can we assume that my economic understanding is not much more than if I was 12 years old, as generally the numbers and concepts you gravitated to bored me rigid. But I am interested in a few things now, including the American bond market, by which I don’t mean who is going to be the next James Bond – as they’ve just named him.

Fitz: Trust you to be excited by some numbers! Yes, they’ve named him, but I don’t care. When it comes to the “American bond market”, this is investors taking on American government debt, yes? And that debt is now up to 40 trillion American dollars, having grown an extraordinary 10 per cent in just this first part of Trump’s second term?

RY: Yes. The investors buy bonds because they’re a good investment, and sometimes “bond yields” – the percentage that the US government pays for them to hold that debt – need to rise because investors have other choices about where to put their money. It’s much more in the news now, but the US fiscal situation is on an unsustainable track. US net public debt is now 100 per cent of GDP. Australia, for context, is 32 per cent of GDP.

Fitz: Is there a danger that those taking on that American debt will just say, “I can no longer trust that the Americans will ever be able to pay it back,” at which point the whole system risks collapsing?

RY: There’s a lot of things to happen before system collapse.