# The big picture in Australia



## MrBurns (9 March 2012)

I and others I know have a feeling tha things arent good on the home front, retail vacancies increasing, spending way own, a feeling like just before previous recessions ony worse, anyone else getting this vibe ?


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## medicowallet (9 March 2012)

MrBurns said:


> I and others I know have a feeling tha things arent good on the home front, retail vacancies increasing, spending way own, a feeling like just before previous recessions ony worse, anyone else getting this vibe ?




Welcome back,

I agree, things are looking interesting in non-mining.

The government is also broke, so can't spend the Liberal's fortunes to get themselves out of whatever comes along next time.  

I for one think Australians could do with a short lean time to help galvanise our economy for the future.


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## Starcraftmazter (9 March 2012)

medicowallet said:


> The government is also broke




Hi. This statement makes no economic sense, a government of such a country as Australia cannot go "broke" as it has it's own currency of which it's central bank is a monopoly controller. Public debt is also extremely low compared to every other developed country - indeed, public debt is the absolute last thing to worry about in Australia.


No, it is the private debt - the highest private debt to GDP in the entire world (about on par with the Netherlands), led by the world's biggest housing bubble, barely supported by a commodity bubble which is crashing which is the real worry.

And indeed, as the commodity bubble bursts, as demographics rapidly change, as the housing bubble bursts - our country, left with an uncompetitive economy due to wage inflation that happened solely to allow people to service ridiculous mortgages, with a manufacturing base a fraction of the size it used to be, will enter the biggest depression in it's history.


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## Beej (10 March 2012)

Starcraftmazter said:


> [Australia has] the highest private debt to GDP in the entire world




This statement is demonstrably false - and by a loooong margin:


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## McLovin (10 March 2012)

Beej said:


> This statement is demonstrably false - and by a loooong margin:




Of course, if the private sector continues to delever then at least one of two things must occur, either the government continues running a deficit and/or Australia starts running current account surpluses. Basically, the government line that it will return to surplus is a myth. If the private sector continues to delever and we continue to run a CA deficit then the government will continue to be in deficit. And it doesn't matter which side of the political spectrum the government of the day happens to be from. On the other hand, the current account surplus that we have been seeing of late is probably due, in no small part, to the private sector deleveraging.

The sum of the three sectors (public/private/external) must equal zero. To date what has happened is the private sector has born the debt burden, as opposed to countries like Italy and Greece where the public sector did.

This chart might explain it better...


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## Glen48 (10 March 2012)

Saw a chart were we are number 4 in the worlds most over priced Housing Canada was first, word is our housing is 40% over priced.
 What could be a problem if the general public get word of a collapse it will cause  instability in prices as all want to unload ASAP.
 Yep we are under way for a depression over the next 20 yrs


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## MrBurns (10 March 2012)

Housing is already slipping, I go on gut feel so I wont win any economic awards but it feels eerily spooky out there, massive job losses, companies outsourcing and/or moving OS and who can blame them, it's not good I think we're in for it.

Even our darling home grown Telstra has it's call centres in darkest Africa, how many Aussie jobs has that cost ?

Libs will cut Govt jobs by thousands, where will those people go ?


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## Kee37 (10 March 2012)

While i feel that definitely yes, the housing bubble is getting closer and closer to a burst point (supported by many international-based economists/forecasting organisations 1,2) it's also worthy to note that most Australians demand for owning houses is still growing with the GenX/GenY prerogative still centered around real estate ownership.

So yeah, definitely they're over priced, but within the realm of Australia the demand still seems to be there for saving towards house ownership which, to me atleast, offsets a lot of the bursting-bubble theories.






1. http://www.news.com.au/money/proper...dward-chancellor/story-e6frfmd0-1225861377051
2. http://www.news.com.au/money/proper...r-through-market/story-e6frfmd0-1226221461085


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## ROE (10 March 2012)

MrBurns said:


> Housing is already slipping, I go on gut feel so I wont win any economic awards but it feels eerily spooky out there, massive job losses, companies outsourcing and/or moving OS and who can blame them, it's not good I think we're in for it.
> 
> Even our darling home grown Telstra has it's call centres in darkest Africa, how many Aussie jobs has that cost ?
> 
> Libs will cut Govt jobs by thousands, where will those people go ?




The wind of change is coming so make sure you build windmills instead of shelters 
1. Own your own home
2. Debt Free
3. Have income generating assets ...

when stuff cheap you buy up and generating more income


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## craft (10 March 2012)

McLovin said:


> Of course, if the private sector continues to delever then at least one of two things must occur, either the government continues running a deficit and/or Australia starts running current account surpluses. Basically, the government line that it will return to surplus is a myth. If the private sector continues to delever and we continue to run a CA deficit then the government will continue to be in deficit. And it doesn't matter which side of the political spectrum the government of the day happens to be from. On the other hand, the current account surplus that we have been seeing of late is probably due, in no small part, to the private sector deleveraging.
> 
> The sum of the three sectors (public/private/external) must equal zero. To date what has happened is the private sector has born the debt burden, as opposed to countries like Italy and Greece where the public sector did.[/IMG]




What about the capital account??? current account is only half the story.


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## Starcraftmazter (10 March 2012)

Beej said:


> This statement is demonstrably false - and by a loooong margin:




Can I just briefly ask you to have a look at the charts you posted and make the obvious conclusion that they actually all contradict each other?

Maybe you should try a bit harder next time.

We do have the highest, along with the Netherlands. UK and USA are significantly below us.


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## McLovin (10 March 2012)

craft said:


> What about the capital account??? current account is only half the story.




Well yeah, the two have to balance. For the purpose of my example though, it's impossible to have the private sector as a net saver and run a current account deficit and have the government in surplus.


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## Beej (10 March 2012)

Starcraftmazter said:


> Can I just briefly ask you to have a look at the charts you posted and make the obvious conclusion that they actually all contradict each other?
> 
> Maybe you should try a bit harder next time.
> 
> We do have the highest, along with the Netherlands. UK and USA are significantly below us.




Que? The first chart (by Steve Keen) shows that the UK and the US private debt to GDP ratio's tower over Australia's! (450%, 250% vs 150%). I have no idea how you can look at that chart and claim that Australia has higher private debt / GDP ratio that the US and the UK???

The other charts just so other aspects of the debt picture, breaking things down a bit more, and adding public debt on some of them etc. One even looks at debt to income just for another view. The reason for any discrepancies is likely the time when the chart was published, and/or the inclusion or not of financial sector debt.


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## Smurf1976 (10 March 2012)

MrBurns said:


> I and others I know have a feeling tha things arent good on the home front, retail vacancies increasing, spending way own, a feeling like just before previous recessions ony worse, anyone else getting this vibe ?



Absolutely. A few examples (all of them are within the past month and are true, I've only removed the business names etc).

1. Large engineering consulting firm. Employee based in Melbourne tells me that "they aren't winning any work" because "nobody's willing to commit to anything given all the uncertainty".

2. Building trades worker who moved from Tas to SA. Suffice to say that he's now driving a delivery van due to lack of work in his trade.

3. Roofing contractor in Hobart. "Not much on and may lay off staff".

4. Victoria is widely reported as "on the brink of recession". Vic isn't exactly a minor state so that's significant.

5. Tasmania is officially in recession and the string of big job losses is becoming rather long. Forestry in chaos, TEMCO (which employs hundreds) shutting practically the whole plant in 2 weeks time and may never re-open, Bell Bay Aluminium (also employs a lot of people) reportedly considering closure or downsizing, K&D Bricks permanently closing the plant at the end of the month, an ongoing stream of job losses across the public service, Aurora Energy's "fire on completion" policy with apprentices, unemployment has hit 7% officially. That's just in Tasmania, and that's just what's happening right now. 

6. Anecdotally, there's pretty overwhelming evidence that in most of the country, just about every industry other than mining or things associated with it are seriously struggling at the moment. 

7. Various media reports of hundreds of people applying for low level retail etc jobs.

8. Practically everywhere you go, people are concerned about money. Either worried about security of their income, worried about the cost of living or worried about their investments. But just about everyone is worried about money in one way or another - the exact opposite of the situation a few years ago.

9. It's now relatively easy to get tradespeople etc whereas this wasn't the case during the boom.

10. The general mood seems to be one of doom and gloom.


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## craft (10 March 2012)

WTF... I’m Confused.




McLovin said:


> Of course, if the private sector continues to delever then at least one of two things must occur, either the government continues running a deficit and/or Australia starts running current account surpluses. Basically, the government line that it will return to surplus is a myth. If the private sector continues to delever and we continue to run a CA deficit then the government will continue to be in deficit. And it doesn't matter which side of the political spectrum the government of the day happens to be from. On the other hand, the current account surplus that we have been seeing of late is probably due, in no small part, to the private sector deleveraging.




O.K first confussion you talk firstly about the current account being in defict and then in surplus -  We have run a current account defecit continously since 1975.



McLovin said:


> The sum of the three sectors (public/private/external) must equal zero. To date what has happened is the private sector has born the debt burden, as opposed to countries like Italy and Greece where the public sector did.




The sum of the three sectors have to balance at the 'Balance of Payment level' only. Current account is only part of the BOP.



McLovin said:


> Well yeah, the two have to balance. For the purpose of my example though, it's impossible to have the private sector as a net saver and run a current account deficit and have the government in surplus.




Private sector as net saver = Provider of Capital
Current Account deficit = User of Capital.

The two actually offset and could theoretically offset perfectly but where there is a surplus (as you seem to be indicating is the potential problem) the government does NOT have to soak up the surplus through a fiscal deficit, The inbalance could/should simply be balanced through the capital account.  In fact we have been a net importer of capital (both debt and equity) for a long time – you would think in a major resource boom we would/should start paying back the debt and buying back the farm.


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## McLovin (10 March 2012)

craft said:


> WTF... I’m Confused.
> 
> 
> 
> ...




It should be current account deficit not surplus.

Reading the end of that paragraph I'm not quite sure what I'm trying to say.



> (3) Private Sector Surplus or Net Saving = Government Deficit + Current Account Balance
> 
> The trade balance (exports – imports) is not the precise term to use when considering all financial flows, the current account balance is. For the US, the two very close in magnitude. We’ll call equation 3 the Sector Financial Balances (SFB) equation. Again, this is an accounting identity, not theory. Disagreeing with it is akin to believing the earth is flat. For examples of this framework directly in use on this blog, see here and here.




http://wallstreetpit.com/8568-the-sector-financial-balances-model-of-aggregate-demand


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## craft (10 March 2012)

Smurf1976 said:


> Absolutely. A few examples (all of them are within the past month and are true, I've only removed the business names etc).
> 
> 1. Large engineering consulting firm. Employee based in Melbourne tells me that "they aren't winning any work" because "nobody's willing to commit to anything given all the uncertainty".
> 
> ...




Despite all this the Macro numbers are still healthy which implies a lot of the pain is structual. The danger is that we mistake cyclical for structural and investment to much in resources and decimate everything and everybody else beyond being able to recover when/if the terms of trade fall. Diversity in Australia's economy needs weaker terms of trades and soon, but I doubt if the mining magnates see it that way.


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## craft (10 March 2012)

McLovin said:


> Reading the end of that paragraph I'm not quite sure what I'm trying to say.




So you've managed to confuse as both then


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## McLovin (10 March 2012)

craft said:


> So you've managed to confuse as both then




It would appear so!

Sorry, I really have no idea what I was saying there. My last sentence contradicted the first. 1am.


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## McLovin (10 March 2012)

craft said:


> Despite all this the Macro numbers are still healthy which implies a lot of the pain is structual. The danger is that we mistake cyclical for structural and investment to much in resources and decimate everything and everybody else beyond being able to recover when/if the terms of trade fall. Diversity in Australia's economy needs weaker terms of trades and soon, but I doubt if the mining magnates see it that way.




3 year election cycles do not make for long term economic planning.


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## qldfrog (11 March 2012)

About the mythical job boom in mining
http://www.couriermail.com.au/business/mining-jobs-not-easy-to-unearth-with-jobs-boom-still-three-years-away/story-fn7kjcme-1226295874657
I work in mining (and have been for the last 15y) and yes the sector is looking for people but there is no golden goose; 
workers are poached from one company to the others but for new opportunities?

Not the thousands we are told about;
Geologist graduates can now find a job, etc etc and good for them
We are talking only dozens per year.
How does this match in number vs the hundreds every weeks lost in retail, etc?
Mining saved us in the GFC I, but this was as good as it was, I see mining loosing jobs from now on, not adding some if this is to be a reflection of my sector (coking coal)


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## Starcraftmazter (11 March 2012)

Beej said:


> Que? The first chart (by Steve Keen) shows that the UK and the US private debt to GDP ratio's tower over Australia's! (450%, 250% vs 150%). I have no idea how you can look at that chart and claim that Australia has higher private debt / GDP ratio that the US and the UK???




Your second chart doesn't even have Australia (did you just randomly post the 4 first charts you found?)

Your third chart shows that Australia clearly has the highest household (ie. private) debt along with Switzerland?

Your fourth chart again shows Australia being well ahead of both the US and UK, being 3rd behind Denmark and Netherlands.


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## McLovin (11 March 2012)

Starcraftmazter said:


> Your third chart shows that Australia clearly has the highest household (ie. private) debt along with Switzerland?




Private debt is all non-government debt, not just household debt.


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## Beej (11 March 2012)

Starcraftmazter said:


> Your second chart doesn't even have Australia (did you just randomly post the 4 first charts you found?)




That's right - I just posted it for context / more information.



> Your third chart shows that Australia clearly has the highest household (ie. private) debt along with Switzerland?




Household debt DOES NOT EQUAL private debt - household debt is a subset of total private debt. Your assertion was "Australia has the HIGHEST PRIVATE debt / GDP ratio in the world" - that statement is wrong as shown by that chart and the first one that only has US, UK and Australia on it.



> Your fourth chart again shows Australia being well ahead of both the US and UK, being 3rd behind Denmark and Netherlands.




No it does not! Private debt = corporate + household debt. From that chart (based on the claimed 2010 figures): 

Spain: 284%
Sweden: 283%
Denmark: 271%
Norway: 268%
Portugal: 259%
Netherlands: 251%
Japan: 243%
Belgium: 241%
UK: 232%
France: 224%
Finland: 212%
Canada: 201%
Australia: 193%
US: 171%

Australia is maybe 13th on that list - and it's ratio is below average, and quite moderate compared to even the lowest numbers on that list for total private debt to GDP. The bottom line is that by any data source Australia is has far form the "highest" private debt to GDP in the world.

I think you are getting very confused about what you were actually originally talking about and asserting! Did you mean to write "household" instead of "private" debt originally? If so just admit that and we can move on. Your statement re Australia's private debt level being the highest in the world is demonstrably incorrect, regardless of the data source.


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## IFocus (11 March 2012)

qldfrog said:


> About the mythical job boom in mining
> http://www.couriermail.com.au/business/mining-jobs-not-easy-to-unearth-with-jobs-boom-still-three-years-away/story-fn7kjcme-1226295874657
> I work in mining (and have been for the last 15y) and yes the sector is looking for people but there is no golden goose;
> workers are poached from one company to the others but for new opportunities?
> ...




Mining is a small employer and during the GFC dumped 19% of its work force it was retail that kept Australia in the game by not shedding workers at the same rate.

This is why treasury (Ken Henry) targeted retail spending because if retail dumped 19% of its work force it would have been game over


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## odds-on (11 March 2012)

Living in NZ i have an outsiders perspective, media coverage about the Australian economy focuses on your resources boom and your expensive property. When the music stops (and it will do at some point), where does an astute investor put their money? 

What do people feel are going to be the key sectors in the next ten to twenty years in Australia? I want to get my money in before the sheeple get involved.

Also how do i short the property market?

Cheers

Oddson


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## Glen48 (11 March 2012)

I hear the ASX is setting the property market so you can trade shorting would be money in the bank, until you can short the banks.


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## Smurf1976 (11 March 2012)

craft said:


> Despite all this the Macro numbers are still healthy which implies a lot of the pain is structual. The danger is that we mistake cyclical for structural and investment to much in resources and decimate everything and everybody else beyond being able to recover when/if the terms of trade fall. Diversity in Australia's economy needs weaker terms of trades and soon, but I doubt if the mining magnates see it that way.



Manufacturing is seriously in trouble and this is a sector that will have great trouble coming back (very, very rarely does a closed or "mothballed" factory ever re-open). 

With the imminent shutdown of TEMCO, we are now in the position where Australia is no longer able to manufacture basic materials and equipment without dependence on others. Without these alloys, we will depend on imported ingredients in order to be able to produce steel at Port Kembla or Whyalla. And of course without steel you don't really have any industry. If there's a war then we're in serious trouble.

That isn't the only such example of course, but we're now pretty much at the point that Australia can no longer support itself. 20 years ago we had 10 oil refineries in Australia. Now there's 7, about to be 6 and the future of two others looks pretty grim which leaves us with 4. 

Our entire strategy seems to be based on selling coal and iron ore (and to a lesser extent other minerals) and importing practically everything we consume. It's ridiculous when it comes to the point that a massive exporter of coal and iron ore won't even have a self sufficient domestic steel industry.


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## McLovin (11 March 2012)

Smurf1976 said:


> Our entire strategy seems to be based on selling coal and iron ore (and to a lesser extent other minerals) and importing practically everything we consume. It's ridiculous when it comes to the point that a massive exporter of coal and iron ore won't even have a self sufficient domestic steel industry.




Sometimes this country feels like the Matrix. We're just being harvested for our natural resources until somewhere cheaper comes along at which point it's game over and we'll be left wondering what happened.

That we are now dependent on a totalitarian state that will do as it pleases is not a great sign of things to come.

There's wonderful irony in Clive Palmer dressing his team in "Free Speech" jerseys; who paid for the team Clive?...Who paid for the team?


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## poverty (12 March 2012)

Smurf1976 said:


> Manufacturing is seriously in trouble and this is a sector that will have great trouble coming back (very, very rarely does a closed or "mothballed" factory ever re-open).
> 
> With the imminent shutdown of TEMCO, we are now in the position where Australia is no longer able to manufacture basic materials and equipment without dependence on others. Without these alloys, we will depend on imported ingredients in order to be able to produce steel at Port Kembla or Whyalla. And of course without steel you don't really have any industry. If there's a war then we're in serious trouble.
> 
> ...




Great post Smurf, fat lot of good it will do tho.  I don't think Juliar and Swanny read this forum   Something needs to be done to arrest this slide into mediocrity or this country will end up royally ******.


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## Starcraftmazter (12 March 2012)

McLovin said:


> Private debt is all non-government debt, not just household debt.




Be it household debt then. Business and financial debt are irrelevant.


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## McLovin (12 March 2012)

Starcraftmazter said:


> Be it household debt then. Business and financial debt are irrelevant.




Irrelevant to what?


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## Starcraftmazter (12 March 2012)

McLovin said:


> Irrelevant to what?




How people spend money and how much debt they choose to take on. You know...what drives the economy.


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## McLovin (12 March 2012)

Starcraftmazter said:


> How people spend money and how much debt they choose to take on. You know...what drives the economy.




Maybe have a read about what happened in Japan because of a debt burdened corporate and financial sector.

I don't disagree with you, Australia's household debt is high, it's one of the reasons I don't think property prices are going anywhere real fast.


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## Starcraftmazter (12 March 2012)

McLovin said:


> Maybe have a read about what happened in Japan because of a debt burdened corporate and financial sector.




Well I wasn't suggesting that it is particularly good, just that household debt is most relevant. Australia has little financial nor business debt, so it's not really noteworthy.


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## McLovin (12 March 2012)

Starcraftmazter said:


> Australia has little financial nor business debt, so it's not really noteworthy.




The bar chart posted by beej "G10 Debt Distribution" would beg to differ.


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## Julia (12 March 2012)

http://www.businessspectator.com.au...tent=21197&utm_campaign=kgb&modapt=commentary

Hayman Capital were one of the apparently few who correctly predicted the GFC.
The above is their commentary about the current global situation, including for Australia.

Satyajit Das has said pretty much exactly the same.


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## Starcraftmazter (12 March 2012)

McLovin said:


> The bar chart posted by beej "G10 Debt Distribution" would beg to differ.




I don't know how old it is but....

In terms of business debt, our companies have deleveraged strongly since the GFC and company debt is at a historic low.

Financial debt has been growing as a result of a housing bubble. There's not much else to say about it. Preferably it wouldn't happen - but this I have said many times, it is no secret that the taxpayer will bail out the banks when house prices plummet. Best to just get over it since it will not change and the repercussions cannot be stopped.


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## Starcraftmazter (12 March 2012)

Julia said:


> Hayman Capital were one of the apparently few who correctly predicted the GFC.
> The above is their commentary about the current global situation, including for Australia.
> 
> Satyajit Das has said pretty much exactly the same.




I don't have a subscription 

Mind giving me the gist?


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## Julia (12 March 2012)

You can join for free.  It's quite a long article and would take me some time to properly try to summarise it.
Here is the front page summary:



> Hayman Capital saw the US sub-prime collapse coming before many others. Now its global strategist says the Euro is unlikely to survive in its current form, Australia is in a credit bubble, and a Japanese debt crisis is going to happen sooner rather than later


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## explod (12 March 2012)

Starcraftmazter said:


> I don't know how old it is but....
> 
> In terms of business debt, our companies have deleveraged strongly since the GFC and company debt is at a historic low.
> 
> Financial debt has been growing as a result of a housing bubble. There's not much else to say about it. Preferably it wouldn't happen - but this I have said many times, it is no secret that the taxpayer will bail out the banks when house prices plummet. Best to just get over it since it will not change and the repercussions cannot be stopped.




A lot of business debt is short term, ie builders doing speckies and in the last year or two banks have been reluctant to lend which may account for a seeming improvement in the national debt level.

May not translate into a good situation going forward, money is needed to make money.


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## craft (12 March 2012)

poverty said:


> Great post Smurf, fat lot of good it will do tho.  I don't think Juliar and Swanny read this forum   Something needs to be done to arrest this slide into mediocrity or this country will end up royally ******.




Most of the things that Smurf listed can be traced to structural change in the economy. If the dollar floats and commodities are traded at market prices, then you either have to make the structural changes dictated by the market, or the government has to get involved through its control of the tax and transfer system.  That is exactly what labour was trying to do with the resource rent tax. Seems like a lot of those opposed to the resource rent tax are also the ones moaning about the structural changes occurring....  I guess it’s easy to want things both way as an armchair critic.


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## McLovin (12 March 2012)

craft said:


> That is exactly what labour was trying to do with the resource rent tax. Seems like a lot of those opposed to the resource rent tax are also the ones moaning about the structural changes occurring....  I guess it’s easy to want things both way as an armchair critic.




The killing off of that tax by the mining lobby was probably the best RoI in human history. ~$50m in campaigning to save $200bln.

I agree with you, a wasted opportunity that we will wear the cost of down the track.


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## notting (12 March 2012)

Yep, I agree with Swany. The mining propoganda was an assult on our democracy and our people.


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## Smurf1976 (12 March 2012)

craft said:


> Most of the things that Smurf listed can be traced to structural change in the economy. If the dollar floats and commodities are traded at market prices, then you either have to make the structural changes dictated by the market, or the government has to get involved through its control of the tax and transfer system.  That is exactly what labour was trying to do with the resource rent tax. Seems like a lot of those opposed to the resource rent tax are also the ones moaning about the structural changes occurring....  I guess it’s easy to want things both way as an armchair critic.



The bit I don't like is the "unfair" part of competition in the market.

How much are the workers in China paid compared to those in Australia? Do they have the same OH&S laws? The same environmental standards?

Why should we be allowing petrol, for example, into the country if it was produced by workers on $5 an hour or without proper protection of the environment? I can see the point in free trade, but there's a place for some restrictions.

So far as I'm concerned, the aim ought to be to encourage genuine efficiency etc but there needs to be some means to prevent gaining an advantage simply through low wages, poor safety, poor environmental controls etc. All we're doing at the moment, is offshoring our industries in order to escape Australian rules and regulations.


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## notting (12 March 2012)

Smurf1976 said:


> So far as I'm concerned, the aim ought to be to encourage genuine efficiency etc but there needs to be some means to prevent gaining an advantage simply through low wages, poor safety, poor environmental controls etc. All we're doing at the moment, is offshoring our industries in order to escape Australian rules and regulations.




Not to mention invading countries around you and using their people as slaves and literally working them to death to build your roads and infrastructure as well as cutting out their organs and selling them to rich Chinese etc.

As much as I dislike the union culture they should have formed a free world global alliance to prevent job destruction by countries that do the above and use child labour etc.  
In the end a Country is not a business and the tickle down theory is a furphy!  
Human rights include treating people with fairness and dignity in the work force and import bans etc should not just be to stop nuclear proliferation they should also be extended to workforce human rights etc.  Other wise slowly but surely your own country will be reduced to well, mass unemployment etc etc.because your competing with kingdoms of slaves.  The Slavedomes use your money to build their armies to control the slaves and eventually, you!
The hard part is that it's questionable whether certain closed societies would open up at all if those conditions were applied or whether giving them all that rope will eventually lead them to hanging themselves as they become drunk with out of touch opulence as in the Gadhafi family.


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## Uncle Festivus (13 March 2012)

It's all about how China & Japan perform as these are our biggest trading partners. We all know that Japan is a basket case about to collapse completely(?) so how are our eggs going in the China basket?

S&P reports that a Chinese GDP collapse is entirely possible:
As Europe’s leaders grapple with a debt crisis and  recession, and the Obama administration looks for ways to bolster the  U.S. economy, world growth in 2012 will rely heavily on China. After  real GDP growth in China slowed slightly to 9.2% in 2011, our base-case  economic scenario calls for about 8% GDP growth this year from  double-digit expansion in recent years.


We view the risk of only 5% GDP growth in China as plausible,  although a stable one at this point. If such a scenario were to  materialize, its negative effect on the U.S. and global economies could  be substantial, *particularly in the commodities and materials markets*,  where China is a large source of demand.​The latest data for AU was pretty terrible ie GDP, trade and unemployment, so high probability of an interest rate cut to 4% in April? Punish the savers again......


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## Starcraftmazter (13 March 2012)

Uncle Festivus said:


> The latest data for AU was pretty terrible ie GDP, trade and unemployment, so high probability of an interest rate cut to 4% in April? Punish the savers again......




Very single cut gets us closer to ZIRP - the point of no return. I'm sure the RBA understands the gravity of this, and I hope they will hold out longer.

In my view it's quite likely that the RBA is targeting small house price drops and will keep the rates at just the right amount to entire house prices do drop - but also try and prevent them from dropping too much.

Thereby I would consider the nominal house price indicator to be the best lead on RBA's decisions.


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## Julia (14 March 2012)

http://www.abc.net.au/radionational/programs/bigideas/oliver-hartwich/3833906
Dr Oliver Hartwich gives his wide ranging views about the world's economies and focuses on the paucity of decent leadership anywhere.
Nearly an hour long, but imo well worth a listen.



> The tectonic plates of the world economy are shifting. While the West is in crisis, Asia is set to dominate the 21st century. CIS Research Fellow Oliver Hartwich sees Europe not just in a financial crisis, but also in a social, political and demographic decline. So where will all of this leave Australia?


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## IFocus (14 March 2012)

Starcraftmazter said:


> Very single cut gets us closer to ZIRP - the point of no return. I'm sure the RBA understands the gravity of this, and I hope they will hold out longer.
> 
> In my view it's quite likely that the RBA is targeting small house price drops and will keep the rates at just the right amount to entire house prices do drop - but also try and prevent them from dropping too much.
> 
> Thereby I would consider the nominal house price indicator to be the best lead on RBA's decisions.





Suspect you are right the RBA would not be blind to the over priced property market.

They would want to bleed it down slowly rather than a blow up.


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## sptrawler (15 March 2012)

Starcraftmazter said:


> Very single cut gets us closer to ZIRP - the point of no return. I'm sure the RBA understands the gravity of this, and I hope they will hold out longer.
> 
> In my view it's quite likely that the RBA is targeting small house price drops and will keep the rates at just the right amount to entire house prices do drop - but also try and prevent them from dropping too much.
> 
> Thereby I would consider the nominal house price indicator to be the best lead on RBA's decisions.




+1 agree 100%.


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