Sunlover

Did anyone see the news report on Channel 9 (or was it 7 - I flick channels constantly trying to find something to watch in the TV wasteland), about a week ago where they talked about the gloomy outlook for the Oz economy ?

National Debt has now reached 48%. Up from 16% a few years ago.

Foreign Debt is now 6.7% of GDP. The US are extremley alarmed about theirs at 5.5%

The economy has actually shrunk during the last quarter (ie. negative growth rate).

And no, this is NOT an epitaph to PB. It is simply a Public Service Announcement.

Wilf

Debt is rife in this country. Interest rates are the loaded gun at people's heads. As I always say, the outlook for Oz is bleak. University graduates are becoming the principal export now.

Poms in, clever Ozzies out.

And before someone says (as they always do) "They come back to Oz" - most of them have not got the right to stay in the UK beyond a couple of years, so it is not surprising they come back is it? The UK is harder to get into than Oz, so it is not known what would be the real situtaion if there was a free choice. I believe an awful lot of young Ozzies, especially the highyl educated, would live in the UK but perhaps retire in OZ - it would be full of old duffers like me reminiscing about careers and exciting life in Europe and the USA, like an old folks' home.

Megalania

Foreign Debt

...
Australian banks and companies now do their borrowing largely in Australian dollars, not foreign currencies. They use a variety of means to do this, including currency hedging.

Previously if a large current account deficit led to a falling exchange rate, it could quickly lead to financial crisis. As capital flowed out and the exchange rate fell, the cost of interest payments and the size of the foreign debt rose, increasing the burden of debt servicing. It quickly hit the balance sheets of financial institutions and companies. This was, and is, most evident in Latin America, and in Asia during the financial crisis.

But with foreign debt denominated in Australian dollars, the RBA no longer has to worry about these risks, only the impact on domestic inflation. The current account simply ain't what it used to be as an economic issue.

What has come to the fore now as the medium-term issue for policy is household balance sheets, with the rapid expansion of borrowing in the '90s. The RBA has been worried about this for some time and is becoming more strident in its warnings.

Alan Wood: Be prepared for a shock

With a bit of luck, the $A will fall while interest rates rise, time for a roll in clover?

Wilf

Thanks for the webpage Mega. A quote from the end of the piece:

"As Stevens also told his fellow central bankers, the next decade is likely to be a lot tougher than the '90s, with the possibility of greater instability, and he doubted that financial markets had priced this into interest rates.

We might not know when it will happen, but sooner or later a recession is inevitable, and the impact on highly leveraged household balance sheets is likely to make it a lot worse than it otherwise would be.

Alan Wood is The Australian's Economics editor. "



Hard enough for poms to get reasonable jobs now (not wonderful career enhancing or competitive posts, just a modest job that pays bills) and hard to afford the booming housing prices, so what about the next decade?

Megalania

Provided the UK economy does not implode, a great time to take time out in the Great Wide Brown Land - as a tourist.

Wilf

Trouble is, many people here are putting eggs in one Ozzie basket. Pounds are changed up, big houses bought, commitments made, then recession. Jobs lost or never found, no family support, no safety net, nothing for free except the outdoors, no money to back out.

Megalania

I repeat myself by saying I believe most Brits would be better served by a long (6 months?) carefree "time-out" holiday except those having a personal connection to Aus. Other nationalities different story.

Wilf

My opinion too.

I think, following that, it should be a 2 year period with the idea of returning after that, and then extended slowly until, say, 5-10 years, depending on the people. That way bridges are not burnt and life is enjoyed more if Oz does not come up to imaginings.

I think it would do some good for all people who can afford such things to live somewhere like Oz/NZ for a couple of years, but it does not suit most to emigrate I believe and that is why about 50% go back and of the 50% that stay, only about half are happy that they did when they are pushed for honest answers.

hamiltonnz

Personal debt over here in NZ has just skyrocketed over the last 10 years. Probably the same in UK & Oz. Visa card limits have increased and some people are up to their limits all the time. the housing market is the reason I think. theres a big building boom over here, so lots of quite serious borrowing going on. Also rich overses buyers coming in and paying big $ for homes & pushing prices up. interest rates here are the lowest now for a long time. If they go up alot over the next few years itll be tough on alot of people living here. Im trying to think of something positive to say now but Im too cold at the moment to think. Its been a cold wet & windy week.

Wilf

One of the worst aspects is young people in debt before they know the true cost. Student loans are giving youngsters huge debts before they even work and that will dictate choices made when it comes to work - leaving NZ/OZ for longer periods than the usual 1-2 year OE looks likely to become necessary. Indeed, the OE is changing from a trip to have fun and look up great grandad's grave to one of necessary earning and career development and it wil get longer and longer. At what point does an OE become emigration because many kiwis and ozzies go on "temporary" OE to UK/Eur/USA for longer than a lot of poms "emigrate" here or NZ (due to it not working out).

bussie

wish this would reflect on the strong au dollar at the moment

or am i talking bull***T

dont know how it all F****NG works :scared:

dotty

The main people who will be affected if interest rates go up are those who have borrowed over there heads to get rental houses. There are too many rentals vacant now but people still buying them, can only see the profits they will make as the housing market goes up, not the empty rent roll. Oz will show clear signs of when things go ass up, first of all too many units on supply, then interest rates go up signfiicantly. If you buy well it wont affect you, buy unique, different, view, water, near schools shops, always in demand. The stuff that gets affected is Units followed by houses in undesirable areas and suburbs that have too much of the same crap. Think OZ, never seen waterfront, view stuff go down yet, or stuff near facilities.

Personally I dont think the market will shudder for a couple of years yet, too many other factors as well. Just buy well that stuff holds its value. And dont forget a lot of these articles are to make aussies think harder about the latest cash roll, 3 years ago they were all buying shares, super had its day too.

Stick with houses, good houses, why? we all need somewhere to live.

These articles are carefully manouvered government issue to "tame Aussies spending". Read them as such and you will stop panicking.

bondipom

Banks here are now asking for min %20 deposit on inner city units because of the risk.

Another way of looking at it is that rent is affordable and provides me with an excellent alternative to buying bricks and mortar. I live close to the city and the beach and pay $300 a week for a 2 bed unit. I would hate to think of the equivalent London price. Woking was bad enough for rent.

It is a renters market so if you don't want to risk your hard earned pounds you could keep your house in the UK and use the rental income to rent here. That way if after a year you regret your move to Oz you haven't lost too much.