Australia is drowning in debt – not Government borrowings – the private hellish sort that drives misery, paralysis even suicide.
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,”
The Economics of the Deep Centre Outrun the Ranting, Canting Fools of Left and Right – Raspberries to You!
PM Rudd did the right thing, acting on the forceful advice of the Reserve Bank of Australia, the Australian Treasury and the International Monetary Fund – all evil, vicious institutions who side with Capital on every matter, according to the luvvies of the left-wing heartland.
With solid facts and vehement argument, they obliged his government to pour billions into the hands of the low paid and embark on a major school building spending spree, to the horror of the conservatives who consider spending money on the people of struggle-town a waste. And the Treasury/RBA/IMF strategy has paid off.
The strategy they employed devolved from the writings of John Maynard Keynes and Hyman Minsky, two academics who stood apart from mainstream neo-classical economics and the Frankenstein Social Democrat philosophy.
Last month, the ANZ job survey unveiled a strong 4.1 per cent rise in newspaper and internet job advertisements. This has just been confirmed by the Olivier Job Index, up 3.58 per cent in September following a 2.43 per cent increase in August.
Before we break out the champagne, job ads remain a sobering 48.1 per cent lower than a year ago.
And this is The Lucky Country, the one that has managed to avoid the bank crashes, mass layoffs, swingeing public debt and bankruptcies of the USA and Europe.
The Economist reported this week on a poll of 33 nations by the Reputation Institute, a branding consultancy, where people rated their trust, admiration, respect and pride in their country. Australia topped the list, despite our national distaste for ostentation and jingoism.
We have much to be proud of. But we must stare down the rent-seekers and monopolists, trade union tyrants, moral crusaders and lazy governments. This task goes on forever and is best fought from the centre of the political spectrum, the deep centre, the political centre owned and held by one party – the Australian Democrats.
David Collyer
Red Alert? Australian Greens Showing True Colours? – Hands Off Australian Business, Watermelons!
Big Business CEO’s are paid obscene amounts! There are few Australians who wouldn’t agree. It is sickening to see leaders simultaneously preside over fiscal disasters and receive breathtaking rewards.
But the solution is not to cap their salaries.
The Greens want a $5 million cap on executive salaries. This may seem a reasonable idea. It’s easy to rail against corporate greed. But we must be careful and bear in mind that government does not own these businesses, individuals do, directly or indirectly.
Our system of democracy allows each and every one of us to own property – money, business and land – without effective limit.
Each and every one of us has that right!
Enter The Greens…
Very few Australians will ever enjoy multi-million dollar CEO salaries. But there is no legal impediment to anyone doing it.
It can’t be stated more strongly. Once we limit pay, it limits our right to conduct free enterprise as we see fit – within the already reasonable limits of existing law – and I see a clear and present socialist agenda.
A dangerous agenda coming from a political party that has positioned itself far to the left of Labor.
This raises the spectre of the bogey man the Conservatives loved to throw at us for decades, but for once with some merit. Greenism Socialism.
Let me confirm I do not own shares or have a pecuniary interest in any corporations. I run a small business.
The fair and reasonable position on this issue comes from the group many Australians – and certainly The Greens – are likely to dismiss:
The Australian Shareholders Association.
The Australian Shareholders Association says legislation is not the answer. They are right.
“If there is a substantial negative vote against a remuneration … (and) if the company has not made substantial changes (in the following year) … we will be voting against the re-election of any directors,” Association chair Helen Dent said on ABC Radio.
That is how the system is designed to work. That is the proper process.
One could argue the system Helen Dent outlines has been remiss. It’s a fair point. But the people in that system – shareholders, management and directors – are the ones financially hurt if executive salary largesse continues. Let them sort it out. They have a direct interest in doing so – and will!
Financial Services Minister Chris Bowen identifies the issue correctly when he says “We don’t live in an economy where the government can come in and put a cap on.”
He’s right – though he should have also said we don’t live in a political system where the government can legislate a cap either – at least not yet!
Much to Senator Bob Browns’ chagrin.
Stick To Trees And Furry Furbies Bob Brown!
We know The Greens loathe business – they don’t waste any opportunity heaping compost on it.
We know they have serious issues with the number of people living on planet Earth and want reductions there too. Try to pin them down on the implications of what they call “sustainable population” in their policies some time!
Reduce who? You, your family, me - Black people? Poor people? The mentally deficient? Moslems? Calvinists? Jews?
They’ve turned the Senate from a “House of Review” into “The House of No”.
I suppose some readers are thinking “Stop scare mongering, Scott!” But making little snips here and there to our system, as The Greens do, only serves to diminish, undermine and ultimately damage our system.
They’ve caused enough damage to this country – witness Black Saturday February 7th 2009 and the nonsense we’re excruciatingly aware of when it comes to The Greens and fuel reduction.
But please…
Don’t let The Greens burn down our business and political system too!
Scott Kane
How long can the lies go on? Either Aussie home prices will crash or enter a long agonizing decline.
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 Had A Skills Program. Howard Dismembered It. Rudd Is Driving A Stake Through It’s Heart.
Once upon time, in the far off 1990’s, I used to teach.
I taught a variety of courses from introduction to computers, office and job seeking skills as well as training business start-ups. These courses assisted long term unemployed people re-enter the workforce. They were accredited TAFE courses and recognized nationally.
I also worked as a consultant to a variety of organizations including TAFE and private enterprise.
It was a challenging and a necessary job, one that could easily drain you by days end. It also had pretty simple rules. It was about outcomes. It wasn’t how low an organization could bid, it was how many “hits” the organization and it’s trainers could achieve. My average was 73%. That means on average 73% of my students achieved full time employment by or soon after the twelve week course. This was considered a very good ratio given these people were often 3 to 10 years or more out of work. At or just above 50% and you probably wouldn’t be called to teach next term.
It was not a perfect system. But by and large it worked.
The job seekers’ self esteem was considered. They were treated as humans – not as statistics and certainly never as a “problem.”
When John Howard took government, it all went. His new system meant the lowest bidder got to make the biggest bucks. Outcomes were not as important as low cost. Trainers such as myself – who were paid more than trainers in equivalent positions today – were told our services were “too expensive” under the new regime.
Performance fell across the board because we didn’t have the resources or staff to achieve it.
The entire job-training structure was bastardized. I should know, I wrote part of the curriculum for one Australian state that was used during the Keating years and until Howard’s hatchet job.
I’m not complaining about the loss of the contracts. I’m a software developer and teaching was a great way to unwind.
But for the unemployed or those re-entering the workforce, it became a soul destroying exercise when the guilt is laid on as thick as treacle. The index finger of authority started chiding the unemployed and untrained, laying the blame squarely at their feet.
Howard’s regime was agony with it’s soul destroying “Work for the Dole” incarceration. Conservatives self-servingly believe people without work “…it simply has to be their fault!” And “They should work for the price of the bus fare.”
Some thought when the ALP took office – bugles blaring for the Aussie worker – we’d see a return to decency, consideration, self respect and empathy.
Instead the system is worse. I know of one professional – bachelor degree education and fully qualified in her field – struggling to return to the workforce in a compressed labour market.
Instead of helping, the Centrelink-appointed private agency is trying to get this person to work in a coffee shop!! Hell! The agency doesn’t get a commission if this professional selfishly and incoveniently finds a position she is actually qualified for. The agency makes money by shoving them into a cafe to serve drinks, not by finding work that matches their skills . This is no isolated incident. It’s virtually “policy” under Labor’s mash up of Howard’s cruel scheme.
Yes – that’s the future of our professionals who step back from the workforce to perform “unimportant things”. You know, like child rearing; you know, Australia’s future. Instead, force them into unsuitable casual jobs, because some coffee shop has an immediate vacancy.
How can this be? This is idiocy of the first calibre.
Now – a conservative lost so far down the garden path he needs a machete to get back – Malcolm Turnbull is calling for the ALP to fix a system his predecessor butchered like Vlad The Economic Impaler.
Turnbull the Transmogrified said:
Well Malcolm, in a sense they did – they used your government’s model and expanded it’s underlying ethos. The real problem here is the replacement is more reactionary than even a conservative would dare put their name to.
It must be excruciating for Malcolm Turnbull to realize, as embattled leader, that the left are operating farther right than his party is. Maybe he should have joined the ALP after all – back in November 6, 1999?
Seriously – the Liberal Party of Australia needs a new leader. Somebody who can “keep the faith”.
They need these qualities right now. So I’m taking this opportunity to act as a temporary, and entirely unofficial (though fully qualified), Job Network provider for them.
If you have the qualities below, please consider nominating at a Liberal office in your state. You will need the following skills and disciplines:
A raft of Simplistic Solutions.
A years supply of one liners for “Question Time”.
The ability to “…feed the chooks.” (the press).
Clueless Enthusiasm.
A firm commitment to the gospel of St Howard that “…all workers are unwashed, lazy peasants!”
The ability to place both feet in mouth simultaneously.
The ability to yell abuse at constituents who disagree.
The capacity to speak for a very long time saying absolutely nothing.
A firm, unshakeable belief that you were born to rule.
A signed, life sized poster of your favourite person in all the world – the name better start with John and end with Howard.
A unique conservative friendly policy that Labor haven’t hi-jacked yet.
The ability to select the right colour for each occasion.
I think they should appoint their very own Fran Bailey. Fran has already proven she has these qualities and more. Fran knows that there is only one colour for any occassion: pink.
It’s the panacea the conservatives need – as they sit out the coming decade in the political wilderness of opposition.
————–
Scott Kane
Australia’s frozen Financial Markets Defrost: Interest Rates to Rise Soon?
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.
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