Prepare to pay for cheap money

FUTURE Fund chairman Peter Costello has warned that the age of cheap money is coming to an end and investors must realise Australia’s inflated asset prices will normalise.

The former federal treasurer told the Financial Services Council Leaders Summit in Sydney that, following global quantitative easing, which he described as “just printing money”, the world is awash with cheap money, leading to a lift in asset prices.

“This is not the norm and one day it will go back to a situation like it was, it is going to turn and interest rates will normalise and you’ll need to think, where will you be when that happens?” Mr Costello said.

“I spend a lot of time thinking about that situation.”

Mr Costello said global growth had been low since 2008 and the Australian economy was showing signs of life, but the recovery won’t be a return to the conditions experienced before the GFC: “While it will pick up, the recovery won’t be the world we knew in the 80s and 90s. I think it will be a low return environment for some time ahead.”