Australians rack up record debt

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This article was published today (the 27th of December, 2009) by the Australian Broadcasting Commission (ABC) (click)

Australians rack up record debt



Reserve Bank figures show that every adult owes an average of $74,000. (AAP: Alan Porritt)

Australian households are in record levels of debt, and for the first time have surpassed American levels.

Reserve bank figures show household debt - the combination of personal and mortgage debt - is equivalent to Australia's GDP.

That means every adult owes an average of $74,000.

Analysts warn that the financial crisis that rocked Main Street in America could well hit Australian families in 2010.

Economics Professor Steve Keen at the University of Western Sydney says it is a sign that families are under financial stress.

"We now have an enormous proportion of income that has to be devoted to paying back interest payments," he said.

"Even if you leave aside the interest payment fact, if you want to reduce your debt now where it would have taken you on average for Australians back in 1990 it would have taken just a few months, now it would take them a year to get back down to the zero mark."

However the Council of Social Service says there is already a debt crisis and it will only get worse unless the Federal Government steps in, with the numbers of new families asking charities for help set to increase next year.

The council's director, Alison Peters, says the Government needs to boost its support.

"We think there needs to be more support given to organisations like local neighbourhood centre like the major charities to be able to assist those people who are really desperate for assistance," he said.

"A number of our organisations have already reported to us and indeed to the Government that they are seeing not only new families coming forward seeking assistance but many families are coming back again and again for assistance because they really are struggling."

Well I have gone to a lot of trouble to pay my credit card debt down to zero over the last several years. I bought most of my Christmas presents from the local thrift shop.

I have some savings in the bank and I am seriously thinking of converting it to gold coins.

Go to youtube and search for Gerald Celente to get an idea of what is going to happen in the next year or two.

Surpassing American levels of debt is quite a feat!

It can be done as long as home values hold up, and employment.

The main problem is living on growing debt is hard to stop, and improving income is going to be hard in the future. Americans also have the help of Congress, who never saw a Trillon they could not spend, which is alone expected to reach GDP in a few years.

Americans are paying down personal debt, but the housing bubble is taking out the value of their homes, and the stock market, is around 10,000, last there in 1998, when a dollar would buy twice as much, so we now stand at half of 1999.

The effective buying power of our income, in food, gas, is back to the 1970's. This is before the, as sure as gravity, inflation that is coming when the cost of two wars on credit, the bailout of the world banking system, which most likely will fail, hit the interest rates.

1972, paying for Nam, interest rates hit 18%, want to buy a house?

Stagflation was the word, stagnant economy, massive inflation. Gold went up ten times, and more, but settled at moving from $35 an ounce to around $350.

Paying for the current debt looks the same, gold has only tripled so far, with interest rates at zero, but they have to rise, and so do taxes.

This time will be worse due to declining house prices, wages, employment, and nothing to build the next bubble on. In the 70's home prices tripled, wages went up, as did employment numbers, inflation wiped out debt. This time inflation will wipe out income.

If the Australian National Debt is low, home values hold up, and employment, the effect of world inflation is going to be good, inflation will wipe out debt. Home prices will go up, and wages.

Just be sure to get out at the top of the next bubble, for inflation will drive prices to where there are no new buyers. Under 25 America has 50% unemployment. They are the first time home buyers, it does not look good. Even if they were well employed, homes prices are falling, and with inflation, will fall in value for several decades. It is a good time to rent.

Austrailia seems 40 years behind. Which is good, government support for jobs, cutting taxes, got us out of the 70's. Home prices did rise for three decades, which supported full employment, till it was over priced, over built, and the bubble popped.

All i can hope for is that the great unwashed masses will actually wise up and vote liberal in the next state elections so the country can start making money again instead of spending it.

spending your way out of trouble is a common labour technique

I don't think it's any surprise, either. I was bemused when i saw the article title. There seems to have been such a wave of 'smart' investor trends in Australia over the last decade or so, but are they really smart? I don't know.. if everyone is using the same strategies, negative gearing and buying into shares in a risk-managed fashion, surely that takes the value and profitability out of the strategy?

Perhaps others are living off the illusion that they can have the affluence of our 'self-funded retiree' generation without the hard work most of this generation has actually supported their investment strategies with.

I just have a problem with the way that a lot of people are prepared to bear the burden of debt and interest rate to have a new car, say. What I mean is, everyone is caught up with looking good on the outside, whether it makes managable financial sense for them or not; but I guess that's what they call consumerism..

edit - grammar

To my neighbors three hours away by plane:

Just spend within our means.

Even if this means living in a smaller house or driving in a smaller car, as long as we have something to cover our heads while we travel or sleep around, it's ok.