Aussie Austerity

Generali

Wookster wrote: »

How much has credit grown in Australia Generali?

Australia has been through an enormous housing bubble hasn't it?

There was a credit boom (I don't have precise figures but growth rates were of the order of 10%+ per year for a decade) and also a housing bubble.

However, at the same time the Coalition (centre right) Government paid off Government debt and funneled billions into the 'future fund', set up to cover future pension liabilities.

Tax treatment of debt encourages people to borrow to invest: any financing losses can be offset against your income tax (eg if you have a BTL and the mortgage interest exceeds your rent then your taxable income is reduced by the amount of your loss!). That treatment makes debt easier to service for many although not for the idiots that have borrowed to consume.

If the economy remains strong then there's no reason for people not to be able to service their debts (big if). Also, credit growth has dwindled to very low levels over the past 5 years without any terrible economic impact.

sabretoothtigger

So Australia is seeing austerity

They seem to be doing the opposite of us. Lower rates but actually lowering borrowing and of course spending (if only on interest)

Krugman on UK argues austerity is a failure. But we dont have austerity, we havent had a surplus for years. I really wonder what he would say about Australia but then again he never makes any reasonable points that Ive read

http://www.nytimes.com/2012/06/01/opinion/krugman-the-austerity-agenda.html?src=recg

However, at the same time the Coalition (centre right) Government paid off Government debt and funneled billions into the 'future fund', set up to cover future pension liabilities.

That sounds very sensible. A government that balances its books is hard to believe exists in this day

You can also claim a lot of relief against PAYG

Good idea and better then a welfare state I think. Maybe its abusable some but so is welfare

banks in Aus are highly reliant on funding from abroad

I was told Aus is seen as a regional reserve currency. Maybe as its linked to trade with China

I see the Aussies are having a Housepricecrash Gen!

Theres a guy who shorted Enron who says Chinese housing is a bubble and will collapse as will much of the pacific economy. However I hear the Chinese hold large deposits on their borrowing which makes this highly unlikely.
That might be the best indicator, negative equity is common or not?

Is it really a 'canard' though ?

Commodity prices have not been particularly strong

sammyjammy

Where do I sign up? Sounds like a sensible place to be!

Wookster

sabretoothtigger wrote: »

Krugman

He is a cult leader who leads a group of brainwashed folks rather than an economist that work based on substantiated theory.

Generali

I've not heard of the AUD being a regional reserve currency TBH but that doesn't make you wrong of course. Bizarrely, the NZD is a genuine reserve currency for many of the Pacific Islands as the NZ Central Bank acts in that capacity for loads of the small Pacific island nations and countries.

There will certainly be negative equity in some parts of Aus. In the towns up an down the coast that have seen big falls and also in some of the newer suburbs of Brisbane. They have had falls in prices large enough to see people in negative equity. Lot of hobby farmers/investment small holders are too: small (<10ha) olive farms sell for less than replacement cost, effectively you get the next 20 years of harvests for free!

The vast majority will not be though as 100% mortgages were always unusual and are now non-existent for practical purposes.

kabayiri

ILW wrote: »

Basically, "live within your means" is a pretty good long term strategy.

Wonder why nobody else thought of it.

There is a difference between the needs of the state and the desires of a small but heavily motivated financial core.

Who profits most from a credit boom? The people supplying the credit of course.

I don't think we were "all in it together" during the boom years, and I don't think it's true now.