Reply to: When is Australia going to collapse under a mountain of debt?

[EternalOptimist]

I have friends in oz on a similar gig to me, similar age etc.
its always gobsmacked me how much worse off and poorer they seemed to be.

never have been able to put my finger on it. they bang on about the weather and the lifestyle etc, but sheesh, there is something not quite right there

[Gonzo]

The exchange rate won't always remain so strong for the Ozzie Dollar

Bear in mind that this is a part of the world where the banks still pay interest on savings. The banks are paying above the central bank rate (reserve bank rate 4.75% v 7 month term deposit rate of 6%), the banks really must need that deposit money but the result is strong demand for the currency.

I'm in New Zealand, they have not had a property crash, just no growth in prices for three years but the average house still costs ten times average earnings. They seem to think that things will shortly return to "normal" of ever rising prices allowing them to withdraw more and more equity to maintain their spending.

I'm not so sure about that. The mortgagee sales that I see are raising only 66% of the value of the outstanding borrowing on them. It is rumoured that the banks are only drip feeding these onto the market to avoid flooding it but I can't get any of my contacts to confirm or deny that. Interest rates are at historic lows and people will be vulnerable if they are raised.

My gut feeling is that there is a lot more debt pain still to come here but having said that the banks have recently started offering home loans to people with less than a 20% deposit again so they are either relaxed, or desperate to stimulate the market, I'm not sure which.

[Moscow Mule]

Last time I lived there an average VB programmer could expect to get a 5 bedroom air con house with a pool.

Australia took a bit of a hit in 2000ish and corrected itself when we should have, it is not a debt country.

I expect them to spiral into a gloomy despair in a couple of days time...

[minestrone]

Last time I lived there an average VB programmer could expect to get a 5 bedroom air con house with a pool.

Australia took a bit of a hit in 2000ish and corrected itself when we should have, it is not a debt country.

[scooterscot]

The pound hasn't just weakened - it has halved in value against AUD, which accounts for half of the increase alone

WHS.

I travelled to OZ some 5/6 years ago when you could buy a $2.6 for a pound, today that's $1.5.

I've found my skill set on offer @ a permie level typically around $150k.

[AtW]

So you think a homeowner borrowing at 10x income could soak up a couple of interest point increases?

Probably not.

[FiveTimes]

when we went we were getting 3 to the £1. when we looked at visiting friends for Christmas 2011 is 1.6/£1.
Lots of people are suffering due to the cost of standard goods - broadband is expense. The only cheapish thing is the petrol but that can fluctuate during the day.

People are coming back to the uk loads now .

[gingerjedi]

They've got a lot of natural resources there that are mined for export, if anything their economy is booming and will only collapse if commodities go down, something that is looking increasingly unlikely with all that money printing that's going on at the moment.

So you think a homeowner borrowing at 10x income could soak up a couple of interest point increases?

They hadn't had a holiday in ten years and admitted they paid over half their income to the bank on interest alone.

I wouldn't be able to sleep at night on those figures.

[Moscow Mule]

Not a problem, you only need to scratch the sea bed off Western Australia and you find a world scale gas field. Not to mention hundreds of years reserves of coal seam methane resources.

It's a shame because there's a world class coral reef off the coast of WA too.

[Fred Bloggs]

Another accident waiting to happen in Australia is the supply of fresh water - they've sucked their water table almost dry in a number of regions and face the prospect of having to build massive desalination plants at a huge huge energy cost.

Not a problem, you only need to scratch the sea bed off Western Australia and you find a world scale gas field. Not to mention hundreds of years reserves of coal seam methane resources.

[Freamon]

Another accident waiting to happen in Australia is the supply of fresh water - they've sucked their water table almost dry in a number of regions and face the prospect of having to build massive desalination plants at a huge huge energy cost.

[Green Mango]

Oz went through the BTL boom as well. Circa 2002/3 an Australian colleague went there for a holiday to see his folks and came back late because he'd bought his third house.

A year or two ago he'd sold one and was desperate to sell another.

They've also got a Labour which did it's best to overstimulate a economy which
was doing fine already. Now there trying to slow things down ....

[Sysman]

They interviewed a local town planner who earned $50k AUD and he let on his modest 4 bed was $500,000 with an interest only mortgage, thats 10x income... sound familiar?

Oz went through the BTL boom as well. Circa 2002/3 an Australian colleague went there for a holiday to see his folks and came back late because he'd bought his third house.

A year or two ago he'd sold one and was desperate to sell another.

[centurian]

The pound hasn't just weakened - it has halved in value against AUD, which accounts for half of the increase alone

[AtW]

They've got a lot of natural resources there that are mined for export, if anything their economy is booming and will only collapse if commodities go down, something that is looking increasingly unlikely with all that money printing that's going on at the moment.