The is an important story from the Sydney Morning Herald. Check it out!
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.
What, he’s managed to buy all of those things for cash?
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…