Default looms for millions of Australians – Sydney Morning Herald

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via Default looms for millions of Australians.

A new credit risk reporting system has highlighted that a large number of Australians are at risk of defaulting on loans. Similar systems in the US and the UK equated poor credit ratings with penal rates of interest, years ago – this predated the 2008 the sub-prime saga.

For me, Australia has a number of related special stories.

I remember vividly working out in a gym in Sydney, watching the TV news, early in the morning in 2008, after the world’s stock markets had gone into global free-fall, at the start the financial crisis. Momentarily, I thought about my pension savings and then reality took over from fear – I convinced myself that what goes down must come up, eventually.

Many years ago, when I was in my twenties, I remember a conversation in a bar in Brisbane, the night before I left for the Far East. I was working with American Express at the time. The friendly lady behind the bar asked me why I was leaving Australia. I explained that I had a job that I liked. She told me a story:

I have a friend who a year ago had nothing and now he’s on the top of world. He’s got a lovely house, a new car and a boat.

I responded:

What, he’s managed to buy all of those things for cash?

She replied:

Well no, not exactly – he got credit…

I remember all those years ago, thinking about the the UK in economic chaos, yet in Australia everybody was laid back. The public sector was massive, the unions controlled the car industry, people worked short days, and lived to get on the beach.

These days, of course, Australia has lost the majority of its manufacturing. But the country survives on its massive natural resources. At an individual level, people still live on credit, perhaps more than ever.

It’s a bubble, waiting to burst on a global shock, in my view. After all, Australia has not really had her sub-prime crisis yet…

Thoughts?

One response

  1. Like Dr Alf I can remember being in Australia but my time there was 23 years ago in Christmas 1991.
    The laid back lifestyle,the stunning scenery and the directness of the people could make the casual observer think that the place could subvert the laws of economics that govern the rest of us and that the bonanza and easy living could last forever.
    What I saw then was that the Japanese at that time were buying up huge tracts of land,water rights and insteaed of spending money in Australia they were building hotels,spending time in them and arranging for all transactions to be paid for using JCB cards.
    That meant that all the money generated went back to Japan and did not really boost the Australian economy.
    It was also obvious then as it still is now that most of Australia’s raw materials and livestock including sheep,aluminium,coal,wool etc were being exported as they were and not being turned into products with added value.
    Other people were doing that whilst the Australians lived on the sale of raw materials.
    Now the Japanese who once dreamt of using Australia as a second home and more living space,have been eclipsed by the Chinese.
    The Chinese now own more land more mining companies and more businesses than the Japanese.
    To me this is a slow mortgaging of Australia’s future because the day will come when there is nothing left to mine and failing to make enough value added goods means that that value is exploited by others rather than Australians.
    Effectively this is living on tick which as it now turns out heavily indebted Australians have been doing for years whilst at the same time selling the stunning scenery within the country to a new group of eager tourists.
    Nothing as they say can last forever and whilst I would hope that the “party is not over for them”,it will be unless people there actually wake up as people in these islands have manifestly failed to do by recognising that everyone has to pay their way.

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