NedKelly

Just wait and see.

Swerv-o

I think the economic prudence of the Howard years is what is placing Australia in a good position to ameliorate the effects of any potential recession.

As a previous posted suggested, the fact that there is a massive surplus means that the government have much more latitude to act to stimulate growth than in the US/UK - tax cuts or reduction in fuel levies for example.

This also gives the government money to invest in infrastructure projects, generating growth as they go.

Another thing that makes Australia different is the compulsory Superannuation scheme. As a result of that, there is an awful lot of money out there that has to be invested into something.


S

Wol

There's recession and recession (AKA Depression).

You can darn your way out of a recession but a fullblown depression - which is a not unlikely scenario - is a bit different.

3000 US banks went under during the great depression: depositors lost their savings. Employment disappeared. Today most of us have pension funds invested in industry: they might go under. Rocketing fuel prices and unavailability could mean food electricity and commodity shortages within days. So don't think it's someone else's problem

Have a nice day <g>.

DrWho

"Key US mortgage lender collapses

IndyMac Bank branch office in Burbank, california (file photo)
IndyMac is the fifth US bank to fail so far this year

One of the largest US mortgage lenders, the California-based IndyMac Bank, has collapsed amid a growing credit crisis.

Federal regulators seized the bank's assets, fearing it might not be able to meet withdrawals by depositors.

It is the second-largest financial institution to fail in US history, regulators say."

http://news.bbc.co.uk/2/hi/business/7503109.stm

Erm... you were saying...

DownUnderPaddy

Trust me, in the coming recession/depression, the modest home/single car, darning and soap saving family will manage a helluva lot better than the non sustainable credit dependent spenders. I know what category our household falls into, and as a result, I sleep pretty well at night ;-)

Wol

I too have no debt and no mortgage.

But in a full-on depression the normal is turned upside-down. Those with savings can lose them - no fault of their own - and those with heavy debt can, if there are enough of them (as in oz) get away with it. They can end up with their debts effectively washed out either because there are too many for a government to allow collection, or through rapid inflation.

Your prudent pension funds can disappear without any input from you.

I'm not saying that the sky is going to fall in tomorrow - but it's a consideration, and the events and practices of the past decades certainly haven't made it less likely.

Budawang

Australia has a few advantages compared to the US and Britain. Unlike those two, Australia has no public debt and a strong budget surplus. If the local economy hits the rocks, the federal government has a lot of scope to cushion the blow through higher government spending and/or tax cuts. For the time being, the economy remains strong due to surging demand from China and other emerging countries. The biggest risk to our economy is an over-inflated property market. Hopefully this will deflate in an orderly manner - i.e. 5% drops in each of the next 2-3 years. This is a best case scenario and, frankly, we'd be damn lucky for it to be that gentle. A major slump in property prices is more likely. Another string to our bow is that our Reserve Bank has been fighting inflation hard for a while now while the US and Britain have been slashing interest rates and are now facing facing a serious inflation problem of their own.

Although the world is facing a scary future, US and British economic managers would kill to be able to swap their problems with those of their Australian counterparts.

DownUnderPaddy

I never said I was mortgage free ;-)

My point was not as to how clever someone may or may not be with their investments (as I agree with you, in a depression, that all goes out the window). My point was that people with a certain mentality can survive a depression much easier than others.

I would put it that in this day an age, more and more people are less and less able to cope with minor downturns in the economy, let alone a global depression !

Wol

I would agree with you there.