AUSSIE SMACK

The people in this “lucky” country (Australia) as they call it have developed an economic/success arrogance just like their cricket team of the late 90’s early 2000’s. Aussies have enjoyed tremendous wealth through the commodities and housing boom, this has lead to consumption economy used to high levels of debt. It has also built that self fulfilling feedback loop that things can only go on and get better. Just like being number one in cricket the only place left is to go down. I believe this is what awaits the future of the Australian economy.

 

It is clearly impossible for the current levels of debt to be sustained. Take a look at this startling factoid that appeared in the local press a few days ago. What has in fact happened is that the belief in the success has resulted in a bubble economy, i.e. housing/mortgage and commodities. Any deflation in these assets and the result will be devastating.

 

MB

 

IN a new record, Australians now owe more in household debt than the country's entire economy earns in a year.

Reserve Bank figures show mortgage, credit card and personal loan debts now stand at $1.2 trillion, up 71 per cent from just five years ago and equating to $56,000 for every man, woman and child in the country, News Ltd says.

Our spending binge, fuelled most recently by the federal government's First Home Owner Grant, means personal debt now totals 100.4 per cent of Australia's annual GDP - one of the highest ratios in the developed world.

"It's the first time household debt has cracked 100 per cent of annual GDP and it's a terrible, terrible sign,'' University of NSW economics professor Steve Keen told News Ltd.

"It shows we are living beyond our means and many highly geared borrowers are now extremely vulnerable to further rate rises - they are already saturated with debt and will not be able to tolerate much of an increase to their repayments.''

Our financial headache is likely to get worse before it gets better. We are in the midst of the peak spending season when billions goes on the plastic, yet the Reserve Bank data dates back to October's debt levels only, so that means there are another two months of First Home Owner Grant-fuelled mortgage activity still to be taken into account.

The extra cost is expected to add billions to the burgeoning debt tally.