Australia is drowning in debt – not Government borrowings – the private hellish sort that drives misery, paralysis even suicide.

posted by David Collyer on Wednesday, October 14th 2009

One in six Australians is having serious trouble paying their debts, according to a survey released yesterday by credit agency Veda Advantage.

The rest of us have also drunk deeply from the cool pools of liquidity the banks provide.

If well managed, the use of debt to buy long-life items is a boon. It can smooth the lumps and improve the quality of our lives.

However – like fire – this wonderful servant is a cruel master.

The seriously indebted cannot lift their eyes from earning a living for a moment. Not for a moment. They can be ruined by any adverse event – unemployment, sickness, even an interest rate rise.

We owe, we owe! It’s off to work we go!

And while Treasurer Swan, the RBA and Treasury are seeing the stimulus package and Australia’s stellar export performance protect us from the economic catastrophe elsewhere, the fact remains that these one-in-six citizens are in very serious financial trouble.

A full economic recovery depends on consumer willingness to spend. The one-in-six cannot spend, and the rest of us will hesitate before making serious commitments to buying even more stuff.

Prof. Steve Keen offers a detailed analysis of this key economic trend at http://www.debtdeflation.com/blogs/2009/10/06/rba-gets-it-wrong-again/

Read it and swallow hard. Major new economic drivers will be needed for Australia to resume the economic growth we have enjoyed in the past. There are further benefits available in the transition to a digital, connected world, but these must be regarded as modest compared to our mountain of debt. Private debt. Crazy-making debt.

Government can’t stop citizens taking on debt. But much more must be done to address the general lack of financial knowledge. Australia needs fresh consumer laws obliging the use of clear language to reduce the informational asymmetry between consumers and the finance spivs.

David Collyer

“David Collyer is currently contesting the Higgins by election for the Australian Democrats against Clive Hamilton for The Greens and Kelly O’Dwyer for the Liberal Party,”

How long can the lies go on? Either Aussie home prices will crash or enter a long agonizing decline.

posted by David Collyer on Wednesday, September 16th 2009

The largest investment of most citizens is their home.  Funnily, this sector of the economy has the poorest statistics and the most lies told.

For first home buyers contemplating the Great Australian Dream, beware!

• Interest rates are at century lows.  We may enjoy another few months of ‘accommodative’ rates, but like night follows day, they must and will revert to normal as the economy improves.
• House prices are currently 6 to 7 times average weekly earnings, when they are typically at three.  Anyone taking on a mortgage without a large deposit and a substantial, secure and growing income is risking everything and may live, work and die for nothing but that mortgage.
• House prices in Europe and America have touched these levels and crashed.  You can now buy a house, albeit of low quality, in Detroit for $US6,000.

These incontrovertible facts speak more loudly and clearly than any gold-toothed salesman’s pitch to get you commit your life to paying a mortgage on whatever property he is selling today.

Associate Professor Steve Keen, an economist at the University of Western Sydney, says he remains confident that house prices across Australia will fall dramatically in the medium to longer-term.

“The boost to house prices courtesy of what I call the first home vendors grant has been substantial,” he told the ABC tonight.

“It hasn’t only pushed up lower level prices below the $500,000 mark, it’s also boosted prices up to $1 million or more, because when those vendors sold their houses to the first home buyers they got an extra $30,000 or 40,000 in cash, which they leveraged up to an extra $200,000 to go and buy houses in the medium to high price range.”

He says this boost is only temporary and that Australia may experience a long slow decline in house prices of up to 40 per cent over the next 10-15 years, similar to Japan’s experience during the 1990s.

And if some pretty boy salesman tells you prices can only rise further, ask him to put it in writing.   Hmmm.  He declined, didn’t he?

For example, in Britain, agricultural land prices began falling in 1850 and continued falling for 90 years.   They spluttered back into life in 1940, at one twentieth of their original price.

The ultimate irony is that government, politicans, bankers, real estate agents and economists know this to be true.  Why are they mute?  Why do none of them feel responsible for warning people of an accident ahead?

David Collyer

Australia’s frozen Financial Markets Defrost: Interest Rates to Rise Soon?

posted by David Collyer on Tuesday, September 8th 2009

Boy, are we ever ‘The Lucky Country’.  Rudd and Swan followed the IMF, Reserve Bank and Australian Treasury advice to pour stimulus into the mouths of consumers.  With a few hiccoughs and burps, we swallowed the cream and the economy responded.

Fortunately, RBA Governor Glenn Stevens kept his head and resisted the world-wide rush to nil interest rates, leaving ours at over 3 per cent while our peers headed for zero.

Why does this matter?

Like a good chess player, Stevens looks several moves ahead.  The RBA knows rates must eventually return to long term averages. A more normal but still low six per cent requires a doubling of the interest rate settings. Ouch!

But consider moving from 0.25 per cent to six per cent.  They must double to 0.5 per cent, double again to one, again to two, again to four and finally rise another 50 percent to six.

At each of those giant steps, more families and businesses in zero rate countries will be consigned to oblivion.  They have a lot of pain ahead of them, and the longer these ultra-low ‘accommodative’ rates apply, the more difficulty their reversal will impose.

And before the conservative L/NP coalition claims credit for these fortunate policy settings, I remind all that these nasty stinkers gave the richest Australians deep tax cuts –THREE TIMES!  They repeatedly eased the taxes from the broadest shoulders, not from the strugglers. Not one bit! Never! Never! Never!

Risks remain.  We could easily be derailed from our rosy path by a widely-predicted collapse in residential real estate prices.  Aussie house prices are stuck at a punishing six to seven times earnings, a heroic undertaking for anyone signing a 30 year contract today. House prices in US, Britain, Ireland, Canada and New Zealand hit these multiples and recoiled.  Not Australia.

Only time will reveal if our economic leaders can engineer an economic soft landing for real estate. Failure here will cause untold hardship.

Socialism or Economic Engineering? Australian Banking Needs a Fifth Pillar.

posted by David Collyer on Friday, September 4th 2009

Australia doesn’t have enough banks.  The big four banks hold 92 per cent of the market and have grown lazy, fat and flabby – charging high fees and taking wide margins (the difference between loan interest rates and deposit rates).

They do this because they can; they can because customers have nowhere else to go.

With only four players, all can compete by advertising and not on price.  In economic language, they are oligarchs operating a cartel.  There is no collusion – they don’t need to – they simply signal to each other with market announcements.

What are our sisters doing?

Across the Tasman Sea, New Zealand has created a government owned bank called Kiwibank.  It is tearing market share off the majors, all subsidiaries of the same four Aussie banks, by offering good deposit interest rates and cheap mortgages.

In Canada, the government has long refused mergers between its five major banks on competition grounds.  This makes them work for their money and provides Canadian citizens genuine alternatives.

It would be easy to create a bank on the distribution capacity of Australia Post, perhaps merged with a regional bank to kick-start the process.  It could begin with a simple set of deposit and loan products.   And where it did compete on price, exactly how fond we are of our oligarch banks would be quickly revealed.

If that sounds rather too Socialist, the government could undertake to float the new bank on the Australian Stock Exchange once it is established and stable, while announcing a new ‘five pillar’ no-merger policy.

Look upon it as economic engineering, an opportunity to re-introduce a genuinely competitive financial market in Australia.

A fifth major Australian bank.  I’d like to see that!

The author holds ANZ shares.

Jenny Mak Should Get The Sack! Australia’s Disgrace – Indigenous Intervention Failure.

posted by Scott Kane on Saturday, August 22nd 2009

Minister For Disingenuous Affairs

Click The Picture Directly Above.

It’s captured from Hon. Jenny Maklin’s website home page and makes Maka’s view of  who  “Australians” are very clear.

Yes, this is the federal “Minister for Indigenous Affairs”.  One would be forgiven for concluding Maka sees the people her portfolio is actually responsible for are “Anglo-Celtic white”, given the singular lack of ethnic diversity amongst the smiling faces basking in her reflected glory.  There’s  not a single indigenous person there!

Her portfolio needs to be renamed to better reflect the Minister’s priorities.   I envisage:  “Minister For Disingenuous Affairs.”

Out of Touch. Out of Time. Out of Basic Decency.

Northern Territory indigenous leader Galarrwuy Yunupingu says the Federal Government’s intervention has failed to improve the lives of Aboriginal people.

Yunupingu said:

“It is now three years old but it hasn’t made Aboriginal people any richer or healthier or happier,”

“It is really and truly dragging people down to create more misery.

“So the intervention that I am calling now is to close. Let’s start again.”

He’s right, of course.  Are we surprised?

There can’t be a person in either chamber of the Australian Federal Parliament who actually cares.

Because if they did we’d hear about it!

Instead, all we’ve heard are Conservatives in the Northern Territory using the issue for political point scoring.

We’ve not heard from The Greens.  Their silence speaks volumes about their “acknowledgement of the original carers”, which equates to:

“Move over, The Greens are here!

…and thanks for all the fish!“

These are Australian Citizens – not vehicles for cutesy, convenient, middle class vote scoring.  Not devices for creating surreptitious slogans  addressing voguish city dwellers.

Either do something constructive to help them NOW or…

Get out of parliament in favor of  people who will!

Millions Squandered By Bureaucrats

We have heard reports from NT that millions in indigenous funding earmarked for the Strategic Indigenous Housing and Infrastructure Program has  been squandered in typical, heartless, bureaucratic bastardism.

Speaking of bastards – NT Chief Minister Paul Henderson vowed he’d:

“…get to the bottom” of how the $672m package was being spent.”

and the NT’s conservative opposition Country Liberal Party called for the Northern Territory and Commonwealth auditors-general to begin

“… an immediate investigation to trace the movement of money under the SIHIP scheme.“

The guidelines for this “funding” are an utter disgrace.  They are a sick, perverted joke on the Aboriginal people.  Australians should be screaming in rage – this could never happen in the suburbs:

• 40-year lease deals have been negotiated with remote communities, which receive their chunk of the money only after they have signed over partial control over their land.
• Seven lease deals have been struck, despite chronic overcrowding in most remote communities – where it is alleged up to 30 people have been known to share a two-bedroom house.
• Not one new house has been built as part of the project.

Thanks to this Minister and her Labor government,  John Howard’s Northern Territory indigenous gulag continues – further eroding basic civil rights, basic economic support and the basic civil liberties that are the birth right of all Australians.

Which under the constitution, includes the Australian Aboriginal people!

“ Minister,Resign.”

“The Westminster System Affords You An Honourable Way Out!”

Conservative Engendered Racism.

Endorsed By Labor Party White Australia Policies?

I remind you this tragedy was created by John Howard’s Liberal/National Coalition government prior to the ALP winning power and appointing “Maka the Minister For Disingenuous Affairs” .  It was supposed to address genuine problems such as child abuse and chronic health problems in the indigenous community.

Australian Democrats Senators Said This Would Fail in 2007

The Australian Democrats Senators argued vigorously against it’s implementation.  They warned it would fail.

They were right, and it did.

The Green’s Sacrificing This Issue For Ecological Communion

The cross benches  in the Senate are now filled by The Greens, who are mute on this issue.  They are too busy arguing about Climate Change and opposing every government proposal on everything.

Balance – oh plagiarising populists that you are – is about all issues of governance.  Not just your pet  – green coloured glasses – agenda item!

But Aboriginal Affairs?

They “acknowledge” them – but we all know what that’s worth!

Liberal And Labor Party Apartheid

This is a bum deal for all Australians.  Taxpayers’ money is being wasted by bureaucrats – and is not getting through to those it is intended for and who urgently need it, Australia’s indigenous people.

It is a bum deal because we Australians are inclined to sit in judgment of other nations’ human rights issues while our government makes hypocrites of us all.

It is a bum deal because the Rudd Government have  not even succeeded in conning themselves.

This government and Jenny Maklin have successfully managed, in just two short years, to create a problem that would bring tears of joy to the eyes of Australia’s second longest serving deflector of human rights –   John Howard.

The Australian Democrats have long sought to “Keep the Bastards Honest” – but it seems we are now reduced to having to “Keep the Bastards from being Xenophobes”  too?

“Please Explain?”

Scott Kane

The Great Green Grab – The Housing Bubble Bust – Gobbling Small Business Resources.

posted by Scott Kane on Monday, August 10th 2009

Victoria – Australia – has some pressing issues to attend to.  There’s a property bubble threatening to burst.  It’s not a sure thing, but it is likely.

While the Australian Greens continue to irrelevantly spout the dogma that we are all responsible for the sad plight of the environment,  the truth is we can’t continue ignoring the fact that the current system of property tax is broken and needs urgent, stimulating repair.

While we watch State and Federal Labor fiddle  around the margins of this system,  their party founders would dry retch if they only knew.

While the  Liberal Party flounder with nothing new, nothing original and nothing of  value to address it.  For Victoria’s Liberal Party the most pressing issue seems to be whether or not a National Party member will lead them at the next election.

Are we to look forward to Joe Bjelke Peterson-style quotes from Spring St in the future?  Telling us the “Writing is on the blackboard in big black letters” or “I didn’t know what was in the paper bag until I took it to the bank?”

Strike a light!!!

We have some serious issues to deal with.  We need a new approach.  Housing is useless to us if:

1. You can’t afford to live in it due to it being sold at more than it’s real world value + interest.
2. You get stuck with mortgage payments on property whose price is in free-fall.

Today the IMF announced for Australia’s general edification:

“Property bubble fears grow as IMF says houses overvalued

Australian house prices are overvalued by around 20 percent and the size of the average mortgage has reached an all time high, fuelling fears of a property bubble.

The problem is being exacerbated by a growing gap between household incomes and house prices, the IMF said.

The Reserve Bank of Australia recently flagged its concerns that a combination of easy credit, low interest rates and lack of supply could create a property bubble which could burst in the longer term, causing a collapse in house prices.

A collapse in house prices would be a disaster for most Victorians, nay, all Australians.  Our prosperity is pinned to the housing sector.  In the near term the consequences are far worse than climate change or drought simply because the effect is immediate and will impact all levels of society.  Arguably the price of property is out of step with the real value of housing and land, arguably we need a “correction”.  But the correction will be painful for all.

For small business and their employees – the backbone of this nation – it could easily be an economic disaster.

We have a system that rewards people for sitting on great globs of land and doing nothing with it.  We have a system that makes pensioners asset rich and cash poor.  Where is the value in holding land worth a million or more if you must dine on baked beans or dog food and just can’t afford to sell?

We are collectively running around hitting our own heads with a Green hammer.  The Rudd government has a climate bill up for the Senate.  If the Greens block it – and all indications are they will – we face a double dissolution.  While the country faces a housing sector economic tsunami the Australian Greens are going to hold the country hostage out of muddle headed bloody mindedness!

The legislation wont go far enough.  So they will block it.

Just how far is far enough?  Why, just one step more than you dare take. No!  One step more than that.

Oh – to hell with impact on Australia!!  We’re the Australian Greens!  We run with careless abandon through the flowery forest  of Reckless Abandon.  Ask not what you can do for your country, but what you can do for the gnomes and elves that live under the ecologically unique fungus!”

As Australians we need a better system for managing housing, land tax and housing equity.  Our “Lucky Country” is rapidly becoming “Blue Print USA”.

Scott Kane