Australians being told we are riding ok

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maveri's picture
maveri
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Australians being told we are riding ok

I got sent this website from somone I know in New Zealand and consequently, it's been quite an eye opener.

However, in Australia, our beloved government is telling us that things are going fairly well in Australia considering! They are telling us the depth of the situation in dribs and drabs and are trying to bolster people's confidence rather than tell the outright truth.

They are even telling us our banks are ok too.

We even have our reserve bank (RBA) telling people that house prices will not crash here in Australia as well.

http://www.news.com.au/business/money/story/0,25479,24679779-5013951,00....

Australia has a housing shortage - well, that's what they say but high interest rates and stupidly high house prices are I think the real reason why people were not buying - they simply couldn't afford it.

Still, our government here thinks that demographics and the baby boomer situation doesn't even play a part in the grim situation - they are not mentioning a thing about it.

One thing I do agree with and that's that the Australian government wants to splash around it's money (our money!) on schemes that will result in jobs - this is at least a little bit better than throwing money at clearly faulty companies!

Still, I think lots of pain is coming and what is totalling frightening is that no-one yet has addressed society really living beyond it's means in terms of total lifestyle - people still think the economy is society - they are in for a big wakeup call on this point.

It's sad that people still have not got the mesage that we cannot go back to the siutation we had (and who wants too anyhow!). The bankers and governments all think that just putting everytihng back will fix everything - how lame. Then again, why wouldn't they think that? after all, they have no answers, so what do people do when they don't have an alternative? they keep /want what they had because it's better the devil you know than the one you don't!

I think Australia is in la la land - it thinks China will somehow save them as all we need to do is dig another hole in the gorund and extract some more minerals.

How do other see Australia handling the current situation?(both in the next 2 years and in the next10?)

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Re: Australians being told we are riding ok

I live in WA the mining capital of Oz. I don't have any degrees in economics. I just read this site and a few others and have drawn my own conclusions.

I see the next two years being much the same as the last two. Our stock market will continue to fall. ASX 2000-2700 is my guess for the bottom. Australia is in a better position than the US. We actually produce something so our exports will bring in money into the country regardless of what happens on Wall Street. (Note a big chunk of that export is food and is more or less unaffected by a global recession). Our exports are being helped by how weak the Aussie dollar is at the moment. Our government has ZERO debt at the moment. That means they have the option of borrowing their way out of any local recession.

The odds of their being a recession in Australia is still not a certainty. Though I think it is likely. That will mean increasing unemployment by a couple of %. If you have a job in Oz you should be doing your best to keep it. Ie make yourself indispensable or be the most skilled. Employers are loathed to sack skilled workers given how short skilled labour was just a few months ago. If you work on a mine site be prepared to be fired. If you work just about anywhere else your odds of keeping your job for at least the next 6 months are good. If you work in Farming, Health, Education you have a safe job.

The housing prices will continue to fall. We are in a housing bubble which is in the process of collapsing. It should take another few years to finish playing out. I expect Housing prices to lose another 40-50%. ie average house should be 3 times the average wage. average wage is $50k average house price should be $150k. 

Long term however Australia will not do so well. We need cheap oil to do anything in this country. Our cities have some of the largest urban sprawl in the world and our exports are all cheap oil dependent. Our farms can grow nothing without super phosphate and urea. Aussie soil is terrible for growing things in. We will go down the drain without cheap oil. We currently export an enormous amount of grain. I'm hoping that when the cheap oil runs out we will be able to still feed ourselves. If not... I recommend spending the next few years moving to a location that has reliable rain, decent soil (if you can find any in Australia) and learning how to grow your own food without Oil.

 

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Maenad
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Re: Australians being told we are riding ok

I'm in Australia. I don't think it's quite as bad as that, although I've been keeping an eye more on the US situation because, frankly, I don't think anything can stop the avalanche now that it has started. So this is how I see it but I'm no specialist in economics. Infact I'm barely able to do any basic book keeping.

Unlike the US we do not have a $16,000,000,000,000.00+ deficit. We have a surplus even after the $40 billion hole was blown in it. That is very important. And our banks are regulated unlike the US where they were completely unregulated and allowed to run amok.

People do tend to get upset about the dollar's value dropping but it's not necessarily bad. A low $AU means that our exports are cheaper and will therefore increase demand for them. The funny thing is though, that all currencies are fiat now. Most of the developed nations' currencies are inflated but they're being compared to one another and especially the $US which itself is experiencing free falls and the odd "dead cat bounce".

So please someone correct me if I'm wrong but, since all these currencies are bouncing all over the place talking about the "value" of any particular currency is essentially meaningless. There is no one stable unit of worth to measure it against.  Even the value of gold varies. Some very clever person like Chris Martenson may be able to calculate the true value of the $AU but the rest of us will have to wait until the environment changes. At least that's how it looks to me.

My personal observation is that politicians will talk any old rubbish to the press but when it comes down to doing the work they usually do at least what they think is the right thing and if you watch the late night interviews on the ABC you'll find they talk less rubbish and more detail.

Paul Keating knew all about the problems associated with
exponential growth (called the J-curve at the time IIRC) and to
increase our savings introduced
compulsory superannuation. I remember learning this in Year 12 Economics for the HSC. It's a bloody good
thing it's there too because if it doesn't save our butts then it may at
least cushion the blow. What I am hoping
is that Kevin Rudd is going to see the wisdom of Keating's ways with the economy but it doesn't look that way. 

There is a $1000/child payment going to families in time for Christmas. Frankly I'm bloody happy to take that money too. As you say at least the stimulous funds are not being thrown away on failed businesses. I suspected at first that it may simply be an attempt to slow the speed of the decent and soften the landing for families, like pulling on the handbrake when you already already know the car's going to slam into the wall.

However the money for the building industry made me realise that they actually believe this would work. OTOH perhaps it also means that more people will actually have rooves over their heads when the shit really hits the fan. I hope so.

The head of the Reserve Bank of Australia made a speech the other day saying that he is concerned that people are using the "R-word" (recession) too much and lowering confidence. That bothers me. Does he really think that or is he just talking shit for the sake of it?

The New South Wales state government is a worry. The poor bastard who landed in the job of premier is only 29! 

Oh well that's all I can think of for now. I think that's what's going on but I reserve the right to change my mind if I've mucked it up somewhere.

Maenad 

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Re: Australians being told we are riding ok

I woke up this morning still thinking about your post so I hope you don't mind the extra reply. I'd like to share my understanding of what's going on but again, I may have some of this wrong and if I do I hope someone will correct me (politely).

maveri wrote:

They are even telling us our banks are ok too.

We even have our reserve bank (RBA) telling people that house prices will not crash here in Australia as well.

http://www.news.com.au/business/money/story/0,25479,24679779-5013951,00....

Australia has a housing shortage - well, that's what they say but high interest rates and stupidly high house prices are I think the real reason why people were not buying - they simply couldn't afford it.

Still, our government here thinks that demographics and the baby boomer situation doesn't even play a part in the grim situation - they are not mentioning a thing about it.

One thing I do agree with and that's that the Australian government wants to splash around it's money (our money!) on schemes that will result in jobs - this is at least a little bit better than throwing money at clearly faulty companies!

Still, I think lots of pain is coming and what is totalling frightening is that no-one yet has addressed society really living beyond it's means in terms of total lifestyle - people still think the economy is society - they are in for a big wakeup call on this point.

Re: banks

Our banks are regulated and companies don't give out credit cards in the same manner that credit cards are given out in the US. Americans get credit cards sent to them in the mail without ever even applying for them. There are even stories about pets having credit cards sent to them! I've heard that the average American will have dozens of credit cards which blows my mind. So while Australians probably are still living beyond their means it's not as bad as in other countries.

What we don't know about the banks is their exposure to the US markets and that bad debt selling from subprime mortgages. The weird "financial products" were sold on all over the world diffusing the risk all over the world which is why the US subprime crisis caused a world wide crisis instead of restricting it mostly to the US market.

Re: Housing

I agree that the housing market has been overblown for a very long time. The stress of not being able to afford even modest housing in Sydney was a significant factor in the breakdown of my marriage at the time and I deeply resent how the state and federal governments have failed us on the housing front. We were DINKS ferchrissake, and all we could buy was a fibro house in the Blue Mountains. I moved to Melbourne hoping that things would be better here but it's not.

Housing's kept expensive by the amount of immigration which has increased enormously over the course of Howard's government. I've been recently told that there are 1000 new immigrants to Sydney every week and there are new suburbs of McMansions in Sydney's outter west for which people cannot afford to keep up the mortgage payments. Those people out there are in serious trouble. I remember doing door-knocking charity work in Menai during the last recession in the early 1990s and there were many families with big houses and cars and no furniture or carpets or even fittings like door knobs. I expect it looks similar out in those new suburbs now.

Another factor that I've not heard anyone talk about the amount of Asians buying up city apartments in Sydney, many of them buying off the plan from Hong Kong. In the 1990s that demand fuelled the building of inner city apartment blocks, and pushed the prices up in Sydney generally. At one point Rose Bay was in the top 5 the highest land values per meter of anywhere in the world. Now really, Rose Bay is nice but that sort of value is just not justified!

Re: Boomers

The retirement of the Boomers is possibly not thought to be scary yet because they already own their own homes and have some superannuation. Frankly the Boomers have benefitted from the best that the 20th century had to offer, particularly full employment, extended peace time, prosperity and social security. The also own lots of property. I find it hard to worry about most of them especially since it's their lack of responsible decision making that's brought this upon us. Of course not all of them benefited from the luck of their generation but a hell of a lot of them did and I wish they'd stop being a pack of selfish fuckheads about it, wake up to reality and give the next generation a hand for a change!

I hear the super funds been exposed to the US financial products and subprime crisis but I don't know how much. It would be nice if somebody could tell us.

Maenad

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jdownie
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Re: Australians being told we are riding ok

You people are deluded, believing the garbage coming from government sources will be your undoing.

Take a look at the gold price in AUD, now at a record high, invert that and you get the value of the AUD in terms of an ounce of gold, now at a record low.

The government has been engaging in a rampant inflationary monetary policy for years now, mostly backed by the hopelessly inflated USD, (take a look at the RBA's reserves, www.rba.gov.au). This is shown in the gold price. If the USD loses value against gold the AUD goes with it, maybe just not as fast.

It doesn't really matter what we produce, the AUD is the liability of the government (a promissary note), the 'surplus' of the government was in fact its own debt, therefore the government (in other words you), is more indebted than ever. I say was because government deposits with the RBA, the 'surplus', are in a sharply downward trajectory and will be zero before long, unless they just print more.

 The amount of AUD's (liabilities) in existence are far in excess of our capacity to redeem it for anything of value.

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Re: Australians being told we are riding ok

Australia is in the enviable position of having very low government debt, and surpluses and so there is a lot of scope to:

a) reduce interest rates

b) introduce fiscal stimulation

This is a positive thing, and means Australia has a lot more scope than countries with very low interest rates already (who have lost one of their economic levers).

On the other hand, most economists over the last few years have been talking with quite some certainty about the "two Australias". The part of Australia that was being driven by the resources boom (see China/India), and then the rest of Australia that was not doing so well, but being held up by the income generated by the other half.

Now that the resources boom has dropped off, it would be silly to think that there won't be serious internal economic results.
The capacity of Australia to introduce fiscal stimuli is also reduced
by the large quantity of taxes raised through a consumption tax (and of
course consumption spending tends to be the first victim of economic
slowdowns).

I don't hold with the conspiracy theories against the government. Only a stupid government would be coming out with comments about how "bad" things are. Panic drives poor economic decision making, and the last thing Australia needs is for everyone to be pulling out of the market and hiding their cash under the bed. It's sensible for the government to be talking positively about those areas where Australia is doing well. So long as they're not outright lieing.

What we are seeing is how the resources boom Australia has enjoyed over the last 10 years was squandered by a shortsighted government who used all that income to fund middle class welfare to boost their vote, instead of using it to improve infrastructure, research & development, and education/training. We'd be in a far better position to ride this out if we weren't spending $3 billion dollars per year (probably more) funding the inefficient personal private health insurance decisions of the wealthy, but instead were using that to improve transport, public health and other areas.

I'm also watching with interest the property market, and the likely effect over the next 10 years of the retiring (and dieing) baby boomers. I also have heard the argument that there is a shortage of housing, and that is what has held up property prices. But we've had population growth on large scales before, and never seen the sort of increase in property prices relative to income that we have over the last 10 years. So I'm a bit sceptical about that. On the other hand, Australia's population is increasing, due to the high immigration levels that have been sustained over the last 10 years, so it's possible that there is some merit to the argument. Time will tell.

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Damnthematrix
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Re: Australians being told we are riding ok

Maenad wrote:

Paul Keating knew all about the problems associated with
exponential growth (called the J-curve at the time IIRC)

Sorry maenad....  Keating is just as ignorant!  The J curve was a term used to describe the point at which Australia would come out of the recession we had to have, and things would go back up, INCLUDING growth! 

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Re: Australians being told we are riding ok
 Well I'm not that confident at all......  There are only two or three Australian commentators I believe:  Robert Gottliebsen, Alan Kohler, and Steve Keen.......
Steve Keen is getting a lot of airplay lately, especiall on SBS whhich s the only TV station where you can actually get real news.  At his blog  http://www.debtdeflation.com/blogs/ you can find this:
 
 
Australias Debt to GDP Ratio from 1860-NowAustralia's Debt to GDP Ratio from 1860-Now

That impression was confirmed when I later saw the US data–courtesy
of Gerard Minack and the availability online of US Census reports. Its
debt to GDP ratio was 150 percent at the end of 1929 (and subsequently
blew out to 215 percent as prices and GDP collapsed in the first 3
years of the Depression).

With financial sector debt included, the USA reached that peak again
in 1987–the year Greenspan, despite his “Austrian” approach to
economics that decried government intervention of any sort, performed
his first “successful” rescue during the Stock Market Crash in October.

That rescue worked, not by overcoming the problem of excessive
debt-financed speculation, but by re-igniting so that it reached even
higher levels. Though borrowing slumped after the Savings and Loans
collapse in 1989/90–falling from 170 to 165 percent of GDP–the
bubble began once more in 1994. It then rocketed on through the Dotcom
Bubble, and didn’t even draw breath then since there were now two asset
market bubbles feeding off each other–the Subprime Bubble’s expansion
more than counteracted the Dotcom Bubble’s collpase, until finally
there were two debt-financed asset bubbles running at once–an
unprecedented event in America’s financial history.

By 2004, even non-financial private debt had exceeded the level that
triggered the Great Depression, while total private sector debt reached
a staggering 290 percent of GDP (without including the impact of
financial derivatives, another form of debt that did not exist in the
1920s).

Furthermore, I wouldn't go so far as calling the mining sector "production".  Mining is mining, production is building motor cars and airports etc....  Mining is selling the farm.

I have serious doubts about the Chinese economy too, and if they tank as well, then Australia will be bankrupt.

Australia has one more serious problem: Peak Oil. Take a look at this:

Australia peaked eight years ago, and has one of the worst depletion rate, second only to the UK at 4.4%  Worse, 1/6 of all the oil we consume comes from Viet Nam.  Viet Nam peaked about four years ago, whilst its domestic consumption is skyrocketing, growing at 7% (a doubling of ten years)  Next year, VN's production is set to fall to 300,000 barrels a day, whilst its consumption will hit.....  300,000 barrels a day!! 

If you ever wanted to see the Export Land Model at work, then this has to be one of the best example.  Expect fuel shortages next year.  UNLESS of course, the economy tanks so badly that demand drops even more dramatically. 

What everyone forgets is that this isn't so much a financial crisis as a DEBT CRISIS...

 Australia's government might not be in debts (for the time bing) but as a nation we are horribly in debt because of OUR personal debt (well...  not ours personally!  I saw this coming a loooong time ago.)

Economist says debt levels more dangerous than inflation

The World Today - Wednesday, 8 November , 2006  12:22:00

Reporter: Eleanor Hall

ELEANOR HALL: One economist who's been measuring
Australia's private debt with growing concern says the Reserve Bank has
made a big mistake with today's rate rise.

Dr Steve Keene is
Associate Professor of Economics and Finance at the University of
Western Sydney, and he predicts that escalating levels of debt in
Australia will push the economy into collapse within two years.

Dr Keene says the Reserve Bank is part of the problem, because it's focusing on inflation rather than this rising debt.

Professor Keene, should the Reserve Bank have raised rates today?

STEVE
KEENE: No, it shouldn't. It was focussing on inflation when I think the
far greater danger to the Australian economy now is the level of debt,
particularly household debt.

The Reserve Bank has dropped the
bundle of debt, because the rate of debt has been growing inexorably
since the mid 1960s, and it's now reached levels which are simply
critical.

ELEANOR HALL: Just how high is the level of private debt in Australia?

STEVE KEENE: The level of private debt is currently 145 per cent of the level of output, so 1.45 times as much as we produce.

Back
in the 1950s, it was 20 per cent. So it's gone up by a factor of six.
It's as though we've gone from having a wombat in the lounge room to an
elephant in the lounge room.

ELEANOR HALL: But isn't it going to help reduce debt, if the Reserve Bank raises the price of that debt?

STEVE
KEENE: No. This is one of the paradoxes, and one reason why I'm now
biting my tongue for last time around, saying well, I think maybe they
should raise rates because hopefully it will have that particular
impact.

Taking a look at the numbers more carefully, as I've
done my most recent debt report, it seems to be about a two-year lag.
After the economy gets into a slump, then debt levels start to fall.

So
you can actually be in a recession and debt levels are still rising,
simply because of the momentum issue that's involved in debt. And,
unfortunately, far too many people know what I'm talking about now.

If
your income starts to fall, that doesn't mean your debt goes down with
it, it means your debt continues to rise, and if you can't meet the
interest payments, then they get capitalised onto what you currently
owe.

So the debt can actually continue having momentum of growth
well after the economy's started tanking it. And I have a feeling that
certainly has been the case in Australia, and it's only being masked by
the scale of the China boom, making it look like the economy's doing
okay.

So I think this… with the Reserve whacking the brakes on now, they've whacked the brakes… the domestic car has already stopped.

<MORE> 
Maenad's picture
Maenad
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Re: Australians being told we are riding ok

Oh... bugger. Frown

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jdownie
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Re: Australians being told we are riding ok

You of the 'two Australia's' or 'two speed economy' should check out this link

www.globalresearch.ca/index.php?context=va&aid=11206

You also don't seem to realise that money is debt, see Chris Martenson's bit on the creation of money again.

The Australian government 'surplus' was nothing more than credit expansion, fueled by some $60-$120 billion, yes billion, worth of outstanding government securities i.e. debt. And maybe the carry trade. Why the discrepancy, I don't know, you'll have to ask the RBA, one set of statistics says 60 the other about 120.

To say the government has no debt when they have securities outstanding is baloney.

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Re: Australians being told we are riding ok

Home buyers walking away from the top end of town

Date: November 29 2008

Natalie Craig and Eli Greenblat

LUXURY house buyers are walking away from deposits
worth up to $400,000, preferring to forfeit the cash rather than pay
millions more in the midst of a financial crisis.

The deposit
dilemma comes as investors offload what has become a major
extravagance: the holiday house at the beach. More than four times the
number of properties are listed for sale in towns such as Lorne and
Torquay than at this time last year.

Agents say a buyer last week
failed to pay more than $3 million to settle the sale of a Victorian
terrace in one of South Yarra's most distinguished streets after
agreeing to buy it in July. An agent close to the deal said the buyer
had been prepared to forfeit a deposit of about $370,000 — the median
price of a Melbourne apartment — but had agreed to pay an extra 5 per
cent deposit to extend settlement until January.

The property is
being advertised online and on the agent's website and sources believe
it could still be sold from under the original buyer, who has a caveat
but does not yet own the title.

In neighbouring Toorak, a trendy
contemporary house that sold for about $4.15 million in the middle of
the year sold again in October for $3.6 million. An agent who
previously marketed the property said he believed the original sale
fell through after a $400,000 deposit cheque bounced. Agent Jonathon
Dixon, of JP Dixon, said several top-end sales had fallen through
recently.

"There's a property that's being presented at Brighton
at the moment … the vendors had $8.5 million in writing. They can't
even get an offer on it at the moment."

Buyer's advocate Christopher Koren said the halving of Australian share prices since last year was affecting buyers and sellers.

"Not
only have you got distressed people who have to sell properties quickly
… purchasers in the past three to four months have walked away from a
contract because their financial situation has changed dramatically,"
Mr Koren said.

"We've seen people walk away from $400,000 deposits."

Only
30 per cent of properties worth more than $2 million sold at auction
last weekend, and a huge oversupply of top-end properties means prices
are likely to fall dramatically.

Coastal "weekenders" are
flooding the market: 73 properties are listed for sale in Lorne
compared with 19 this time last year, and 104 in Torquay compared with
34 a year ago. Listings in Sorrento have jumped to 98 from 40, and in
Portsea from 32 to 47, according to Real Estate Institute of Victoria
figures. Kay & Burton Portsea agent Liz Jensen said a rush of sales
before Christmas could signal a desire by vendors to maintain a
conservative cash position.

Bayside suburbs are also struggling,
with three Hampton properties recently passed in without a bid. A house
in Alicia Street was marketed as "reduced by $600,000", with a $4.4
million asking price. It failed to sell and is now for rent.

Almost
200 properties are listed for sale in Brighton, about 10 times as many
as last year, and prices are being pushed down. A designer home at
Kinane Street, Brighton, which was offered for about $4.5 million a few
months ago, failed to sell at auction on Sunday. The highest bid, $3.3
million, was made by the auctioneer.

"A year ago when the market
was going ballistic … a lot of people moved into secondary property but
still paid a very full price," an agent said. "These are the people at
the top end that are being hit the most. If you've got an exceptional
triple-A property, you're OK. There is still a lot of money around."

While
the top end is flailing, agents say the bottom end remains strong,
propped up by first-home buyers buoyed by new grants. Auction clearance
rates for properties worth less than $500,000 are about 54%, and median
house price data shows prices are increasing in the sub-$500,000
bracket, but falling in the top brackets.

Meanwhile, the RP
Data-Rismark property price index has shown gains in each of the past
two months and Melbourne prices climbing the fastest in eastern
Australia. The index suggests like-on-like prices climbed 0.2 per cent
in September and 0.4 per cent in October. Melbourne prices slipped 0.3
per cent in September before jumping 1.4 per cent in October.

With MARC PALLISCO, PETER MARTIN

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Re: Australians being told we are riding ok

Thanks for the link jdownie, that's interesting.

Jason

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Re: Australians being told we are riding ok

Car sales crash
Chris Zappone
December 4, 2008 - 11:37AM

http://business.smh.com.au/20081204-6r1e.html

Car sales in Australia have crashed with demand falling more than 22% in November, with the industry set to be squeezed on multiple fronts in the new year.

The Federal Chamber of Automotive Industries (FCAI) said today 71,647 new cars and trucks were retailed last month, down 20,434 on the 92,081 sold in the same month last year.

"It is clear that people are being more cautious with their money as the magnitude of the global financial crisis deepens,'' FCAI chief executive Andrew McKellar said in a statement.

Year-to-date, the market is down by 2.9% compared with the same period in 2007.

Car loans more expensive

The drop in car sales comes just as the exit of two large wholesale car financiers, GE Money and GMAC Finance, may make car finance more expensive for consumers and dealers, alike.

One industry expert said the absence of the two companies would shrink the pool of available car finance sources by up to one-quarter.

Car loans are expected to grow more expensive with few competitors and the cost of debt pushed up by the financial crisis.

With Australia on the verge of a recession, this could create more headwinds for the local industry.

GE Money and GMAC both announced last month they were withdrawing from the local car finance market as the credit crunch forced a scale-back of their parent company's lending.

Dealers scrambling

The exit means dealers will have to scramble to find wholesale loans needed to fill up their floorspace and car yards.

"A lot of bad dealers are seeing this as a real challenge,'' said a source within the industry who asked not to be named, "We're not talking Armageddon but it's a real challenge."

As the cost of credit stays high, he said, it will be hard to find a replacement.

David Purchase, executive director of the Victorian Auto Deal Association said the government is aware of the problems facing the auto industry in Australia.

VACA is urging the government to ask the companies to delay their departure for the business.

"The Prime Minister and Treasurer are well aware of the issues and the seriousness,'' Mr Purchase said. "They're a fairway down the path in looking at proposal,'' he said.

In spite of the difficulties facing the car industry, FCAI said sales for the full year were still expected to top one million, the industry's second best year on record.

Toyota was the top selling company last month with 17,473 vehicles, ahead of Holden on 9749 and Ford on 7233.

Toyota also led the market overall with 219,984 vehicles, compared to 119,520 for Holden and 97,216 for Ford.

US car makers struggle

Despite the gloomy outlook, the local market is faring better than overseas. Particularly in the US, car makers are struggling.

General Motors, Ford and Toyota said yesterday November US sales tumbled more than 30% as the recession and Detroit car makers' aid pleas kept buyers away from showrooms.

GM, the largest US car maker, said sales dropped 41%, while No. 2 Ford was down by 31%. Toyota, Asia's biggest automaker, posted a 34% decline and Honda slid 32%.

czappone@fairfax.com.au

BusinessDay with AAP

AAP

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Re: Australians being told we are riding ok

Housing construction figures plummet

http://www.abc.net.au/news/stories/2008/12/04/2437732.htm?section=justin

The number of new homes approved by planning authorities continues to
fall.

Figures from the Bureau of Statistics show about 10,700 homes were
approved in October.

That is 5.4 per cent less than the month before in seasonally adjusted
terms.

Approvals are down 26 per cent for the year.

maveri's picture
maveri
Status: Silver Member (Offline)
Joined: Nov 20 2008
Posts: 159
Re: Australians being told we are riding ok

It seems our government is taking the option of trickle feeding us the bad news.

Bit by bit as things go pear shaped we are having information slowly adjusted to mould towards what's really going on.

The first reports of why Australia is sitting pretty are slowing being unravelled and the not so good picture is emerging.

To date, no-one has bothered to factor in the baby boomer portion, either in housing or in jobs - we have seen a few reports of businesses struggling as experienced baby boomers depart their industries and the rate of apprentiship hires is way short for adequate coverage.

We were not even allowed to mention recession a few weeks ago as you were labelled a doomist and blamed for contributing to the downturn *sigh* - it's like the 3 monkeys, See no evil, hear no evil, speak no evil.

Now we have the compulsary internet filtering coming in - involving a blacklist of over 10K sites and we are not allowed to look at the list! Shame Australia doesn't have a constitution that protects the freedom of speech - I mean, who knows, our government may block this website deeming it to be a site that delivers a message that is contrary to the held view of the Australian government and as such is disruptive to the economy! If only they woud listen and realise that it's sites like this that give people the information to make decisions before it's all too late.

Whilst I don't support our governements position on upholding our local car industry, at least the recent financial backing was given on the proviso of the car industry supplying green motorehicles etc - this is better than the US tack which is just to dole out money to back the current dying system.

Australia is sitting pretty as long as the governement keeps it's eye's covered and it keeps playing the 'It's all good' repeat soundtrack that it has going - for the rest of us, we realise that there are bigger problems afoot than just the financial crisis

:-)

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Big Brother awakes...

Alan
Kohler http://www.businessspectator.com.au/bs.nsf/Article/Big-brother-awakes-$pd20081209-M5RWD?OpenDocument&src=ei

Big
brother awakes

TOP
News

Memo
Kevin Rudd: this is a capitalist system, not a socialist one. That means although
the state makes plenty of noise and gets a lot of attention, its effect is
marginal.

Sorry to break
it to you folks in Canberra, but the business of government ain’t what it
used to be. And frankly, that’s mostly due to your own efforts during the
1980s and 1990s – privatising everything and letting the market take
over.

Well, it did
take over and the state sidelined itself. And now look what’s happened.

I don’t
want to sound like a commie or anything, but I think we can conclude that much
of ideological underpinnings of the Reagan/Thatcher revolution – centred
on the notion that the private sector always does things better than the public
sector – was not entirely correct.

Anyway, too
late for that now. The result is that governments are largely spectators of
events, not players. They’re very engaged spectators, to be sure, and
they’re doing a lot of noisy barracking, but bankers and industrialists
are the ones on the field.

Monetary policy
has been spectacularly unsuccessful for years, and still is. Fiscal policy has
been in a coma for decades as politicians in Australia vied to have the biggest
surplus, while in America they vied to have the biggest deficit through
ideologically driven tax cuts.

And now
politicians are trying to wake up the coma patient. The eyelids are fluttering,
but that’s about it.

It’s
perverse, and not a little pitiful, for the Rudd government to be borrowing
money, sending out $1,000 cheques to people and exhorting them to spend it,
please, to try to keep Australians employed.

Treasury
apparently estimates that 70 per cent of the money will be spent between now
and the middle of next year, which will add 0.7 per cent to GDP and
“create” 75,000 new jobs. But we know all about the accuracy of
Treasury estimates.

Too much
spending and borrowing is how we got into this mess. Now, as a result of a
series of shocks to the banking system brought on largely by the banks
themselves, a reduction in borrowing – deleveraging – is being
forced on the world.

So we are now
painfully discovering the extent to which employment has been supported by
debt, both directly and indirectly.

The first to go
are those directly employed in the finance business. Hundreds of thousands of
banking and finance jobs are being cut in London, New York, Zurich, Tokyo and
Sydney.

Skyscrapers are
simply being hollowed out as the 'debt industry' shrinks.

And then there
is the other side of the debt industry. It turns out, for example, that much of
the employment in childcare was financed directly by borrowings that were
supported by imaginary intangible assets. The collapse of ABC Learning and CFK
has exposed that, so a series of unprofitable centres will have to close and
the staff will be thrown out of work.

Employment in
housing and the motor industry has also been financed by debt because the
products usually require the buyer to take out a loan. The reduction in
lending, and in the case of car dealers the complete disappearance of two
lenders from the market, is reducing employment in those industries.

Retail consumer
spending in general has been financed by debt, and as a result household debt
in Australia has increased from about 50 per cent of disposable income during
the last recession 18 years ago to 160 per cent today.

Spending will
now be cut to reduce debt and retailers are now reducing staff and closing
stores.

Likewise, many
companies now find themselves with too much debt – either because
it’s too expensive or because it can’t be refinanced when it falls
due – and must reduce dividends, cut staff and/or sell assets.

That is
reducing the value of both property and shares.

In some cases,
as Gerry Harvey of Harvey Norman highlighted in our
interview
with
him on Friday, commercial landlords are responding to the pressure from their
banks by trying to increase rents. That is simply accelerating the retrenchment
of employment.

Where the new
debt equilibrium will be is anyone’s guess. Markets have a tendency to
overshoot and in some ways the deleveraging now underway has the feel of
something entirely out of control.

On the other
hand, there’s no rule that says household debt must return to 50 per cent
of average income. Interest rates are going to be very low for a long time, so
servicing debt may not be a problem – although there is a huge mismatch
between the market price of wholesale credit and the official cash rate, so
mortgage rates are not falling as quickly as central banks are cutting the cash
rate.

To get around
this, and to avoid the nightmare of persistent deflation, central banks are now
starting to shift their strategy towards 'helicopter money' – that is, simply
printing cash and getting it out there.

If the banks
won’t increase the money supply through credit creation, central banks
will have to do it directly, not by literally dropping it from helicopters but
by buying any kind of assets – not just government bonds.

In that context
there is nothing wrong with the Rudd government sending out cheques to
Australia’s poor families, except it’s not enough and it
won’t be spent.

In fact, it
shouldn’t be spent. The sooner we all get our credit card balances, car
loans, mortgages and corporate debt down, the sooner businesses will start
hiring again.

Governments
must provide a safety net and, to an extent that is sensible, can become an
employer of last resort. Not painting rocks on the side of roads, but building
infrastructure.

And as a result
new model for organising society will develop, with more government
involvement. Could be worth a try, although they’ll eventually stuff it
up again too.


jdownie's picture
jdownie
Status: Bronze Member (Offline)
Joined: Apr 7 2008
Posts: 58
Re: Australians being told we are riding ok

I heard on the radio today that due to the global financial crisis the Federal Government is giving away money, for free!

They will automatically credit your bank account, how cool is that?

I think they should give every citizen a billion dollars, after all they've given more to the banks and the car dealers. We'll all be filthy rich!

I can't see any flaw in my argument, I challenge anyone to find one.

Set's picture
Set
Status: Silver Member (Offline)
Joined: Sep 26 2008
Posts: 112
Re: Australians being told we are riding ok

jdownie wrote:

I heard on the radio today that due to the global financial crisis the Federal Government is giving away money, for free!

They will automatically credit your bank account, how cool is that?

I think they should give every citizen a billion dollars, after all they've given more to the banks and the car dealers. We'll all be filthy rich!

I can't see any flaw in my argument, I challenge anyone to find one.

If this were to actually happen, the buying power of that billion dollars would not be able to purchase bus fare to the soup line.

jdownie's picture
jdownie
Status: Bronze Member (Offline)
Joined: Apr 7 2008
Posts: 58
Re: Australians being told we are riding ok

So Set, perhaps with the smaller amount we might actually make it to the soup line?

Set's picture
Set
Status: Silver Member (Offline)
Joined: Sep 26 2008
Posts: 112
Re: Australians being told we are riding ok

jdownie wrote:
So Set, perhaps with the smaller amount we might actually make it to the soup line?

Perhaps we wouldn't even need soup lines if we changed to an honest monetary system that was backed by gold, rather than debt.

krogoth's picture
krogoth
Status: Platinum Member (Offline)
Joined: Aug 18 2008
Posts: 576
Soup Flavors

For any of you investors out in internet land, buy Campbell's stock! It's 29.86 right now, but it will be $3000 a share once the economies around the world collapse. I like Cream of Mushroom flavor, and I hope they have it available for the soup lines. Yummy!

CAMPBELL SOUP CO

(NYSE: CPB)

After Hours: 0.00 N/A (N/A)7:00PM ET

Last Trade: 29.86
Trade Time: Dec 8
Change: 0.00 (0.00%)
Prev Close: 29.86
Open: N/A
Bid: N/A
Ask: N/A
1y Target Est: 37.40
Day's Range: N/A - N/A
52wk Range: 28.94 - 40.85
Volume: 0
Avg Vol (3m): 3,290,510
Market Cap: 10.66B
P/E (ttm): 9.70
EPS (ttm): 3.08
Div & Yield: 1.00 (3.30%
Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Australians being told we are riding ok
Glen Stevens : "Our own estimates suggest that Chinese industrial production
probably declined over the four months to October"
 
Production declined - well, well,
so those strange forecasts of China's 7.5% growth causing possible social unrest
are now forecasts of negative growth and possible social unrest.
That makes a lot more sense.
Do you ever get the feeling that a lot of economists are employed
to simply talk the economy up, no matter what,
rather than to tell us what is really happening ?
 

Sent: Thursday, December 11, 2008 7:13 AM
Subject: [roeoz] crash countdown - Rio, Bluescope Steel and BHP reduce workforce

Mining giant cuts 14,000 jobs
Scott Rochfort
December 11, 2008 - 7:49AM

IF AUSTRALIA needed any further evidence the resources boom has shuddered to a halt, it came yesterday in the announcement the world's second biggest miner, Rio Tinto, would lay off 14,000 orkers.

Rio Tinto refused to indicate how many of its 17,000 full-time staff and several thousand contractors in Australia would be affected by the cuts. It employs about 110,000 workers and contractors globally.

But the announcement was the clearest signal yet that the jobs boom that has drawn tens of thousands of workers to the resource-rich parts of Australia in the past decade is over.

"Given the difficult and uncertain economic conditions and the nprecedented rate of deterioration of our markets, our imperative s to maximise cash generation and pay down debt," the Rio Tinto hief executive, Tom Albanese, said in a statement to the haremarket.

Burdened with a crippling $US38.9 billion ($59 billion) of debts and apidly falling commodity prices, Rio Tinto said the cuts would be art of its push to repay $US10 billion of debt by the end of next year.

The cuts come two weeks after BHP Billiton dropped its $US66 billion bid for Rio Tinto. Shares in Rio Tinto have fallen more than 40 per cent since.

Much of the debt stems from Rio Tinto's $US38 billion takeover of the aluminium producer Alcan last year, near the peak of the commodity cycle.

In a hastily convened media conference, Mr Albanese said there was no risk of Rio Tinto defaulting on its debts. "We are comfortable with our financial position," he said. "We have taken a total review of the business and the capital requirements."

When asked if Rio Tinto was wrong to reject the BHP Billiton offer, Mr Albanese said: "I don't think it would have changed the outcome." Some believe European competition regulators would have blocked the deal.

A Rio Tinto spokeswoman said the company would not reveal where the job cuts would come from until the first three months of next year.

The Construction Forestry, Mining and Energy Union warned last night Rio Tinto could face fierce opposition from its Australian workforce if it laid off any workers from its "hugely profitable" coal and iron ore mining divisions.

The union's national president, Tony Maher, warned Rio Tinto "will get a lot of argument from us" if it attempted to cut thousands of jobs in Australia.

"There's no justification of cutting back the workforce," Mr Maher told the Herald.

"It shows the folly of taking on tens of billions of debt."

Rio Tinto's shock announcement follows a warning from the governor of the Reserve Bank, Glenn Stevens, that the Chinese economy - which has driven much of the resources boom - had "slowed much more
quickly than anyone had forecast".

"Our own estimates suggest that Chinese industrial production probably declined over the four months to October," Mr Stevens said on Monday night.

The bursting of the commodity price bubble, however, has not dampened Rio Tinto's optimism that the demand for resources will recover. Rio Tinto said it maintained "its belief that the industrialisation of developing economies with large populations will support much higher levels of metals and minerals demand
worldwide in future years".

In London, Rio shares, which have fallen nearly 20 per cent since November 25, surged by that amount overnight to close at 1,514 pence, adding to yesterday's advance. BHP Billiton shares gained 6.7% in London to 1,234 pence, also extending a rise on local markets yesterday.

BlueScope Steel, meanwhile, declined to confirm reports that 200 contractors had been laid off at its Port Kembla plant.

BHP Billiton is yet to announce any large cuts in its workforce.

This story was found at: http://business.smh.com.au/business/mining-iant-cuts-14000-jobs-20081210-6vu1.html

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Australian inflation......

Chart of U.S. Consumer Inflation (CPI)
 
- using the old 1980 method of calculating inflation puts it at ~12% already.
 
Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Australians being told we are riding ok

More tunnel money worries...

Harbour tunnel a $1b black hole
Brian Robins
December 11, 2008

http://www.smh.com.au/articles/2008/12/10/1228584929835.html

THE State Government is expected to pay $1.1 billion to the owners of
the Sydney Harbour Tunnel over the next 14 years - twice the $550
million construction cost - due to overly optimistic forecasts about
toll revenue.

The surprise liability has been disclosed by the NSW Auditor-General,
who confirmed the Government paid the tunnel owners - Transfield,
Kumagai Gumi and Tenix - $58.9 million in 2007-08 alone. The Auditor-
General has forecast this annual payment will rise steadily over the
next five years, approaching $100 million a year.

The first of the city's privately owned road tunnels, the Sydney Harbour
Tunnel is a growing drag on state finances. It is not alone: two other
road tunnels - the $680 million Cross City Tunnel and the $1.1 billion
Lane Cove Tunnel - have run into financial difficulties because traffic
volumes fell well short of projections. Sydney's other road tunnel, the
M5 East, is owned and operated by the Government.

The Lane Cove Tunnel was again downgraded by Moody's Investor Services
this week.

Instead of 100,000 cars per day using the road, there were just 70,000
according to the November figures.

Moody's lead analyst, Ian ChanChong, said the poor traffic figures will
continue to place "negative" pressure on ratings.

He said the downgrading "reflects increased concerns that the company is
likely to be in default in the short term".

Under the original financial agreement with the Sydney Harbour Tunnel's
owners, the Government must make top-up payments to ensure its
viability.

This payment is now running at more than $1 million a week, even though
the project has been operating for more than 15 years. The Auditor-
General estimates the Government will pay $1.1 billion to the tunnel's
operators over the balance of the operations agreement. Ownership of the
tunnel is to revert to the Government in 2022, by which time it will
have been in operation for 30 years.

In 2007-08, tolls collected from the tunnel fell to $39.5 million from
$43.7 million a year earlier.

"It was always known the tunnel would not produce the revenue sufficient
to offset the cost of construction," a former auditor-general, Tony
Harris, said yesterday.

One overriding difficulty was the tunnel operator could not fix a toll
reflecting the true cost of construction because the toll on the bridge
would be significantly cheaper, he said.

with Linton Besser

s-aus's picture
s-aus
Status: Member (Offline)
Joined: Oct 24 2008
Posts: 3
Re: Australians being told we are riding ok

Damnthematrix, I'm not normally one to post on forums, but I felt it was necessary to question one of the graphs you posted. From what I could gather, your post entitled "Australian inflation...." displays a graph shown on this site:

http://www.shadowstats.com/charts_republish#cpi

... which appears to model the U.S. inflation, unless I'm mistaken.

If you happen to have such a graph for Australian inflation I would be interested to see it.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Australians being told we are riding ok

Ooops...  you are absolutely correct.  I lifted the chart from an Aussie site, and assumed, wrongly it is now obvious, that the figures were Australian.

Thanks for pointing this out, i'll try to be more careful in future.. 

s-aus's picture
s-aus
Status: Member (Offline)
Joined: Oct 24 2008
Posts: 3
Re: Australians being told we are riding ok

Yeah no worries mate. You wouldn't happen to have such a graph for Australia? Anyone else out there?

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Analyst predicts mixed fortunes for Aust mining industry

Analyst predicts mixed fortunes for Aust mining industry



Conditions for the coal industry are expected to improve from mid-2009.

Conditions for the coal industry are expected to improve from mid-2009. (ABC TV News - file image)

A leading resource analyst at ANZ Bank says almost half of all mining companies in Australia are currently operating at a loss.

ANZ's head of commodities research Mark Pervan says contract prices
for coal have dropped significantly since last year and further drops
are forecast when contracts are renegotiated in early 2009.

Mr Pervan says smaller miners will be hardest hit and coal is the most vulnerable resource.

"It has been held up very strongly by some very tight supply issues,
but also some very strong demand out of Asia, so it does look
vulnerable to corrections," he said.

"The base metals have sort of taken their medicine now by basically
on a spot market they know the price straight away, whereas there's a
looming downside issue coming for the coal industry.

"I think that coal doesn't look too good in this current environment."

Mr Pervan believes conditions should improve from mid-2009.

"There's a supply issue looming, in a sense that there isn't a lot
of supply about and if you start to see some sign of life on the demand
side, then that could actually see prices recover," he said.

"2010 I think will be a much better year than 2009 - if producers
can hold out through the next six to nine months, on the other side of
this is some pretty encouraging conditions."

Yeah right......  maybe on Mars.

Mike 

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Australians being told we are riding ok

Holden export program axed
Jez Spinks, drive.com.au, January 7, 2009

http://www.drive.com.au/Editorial/ArticleDetail.aspx?ArticleID=60018

Plans to export the Holden ute to the US where it would be sold as a
Pontiac have been dropped as General Motors feels the global economic
pinch. JEZ SPINKS reports.

Holden's lucrative export program has taken a major blow believed to be
worth hundreds of millions of dollars after US brand Pontiac cancelled
orders of the Commodore Ute in response to the global economic crisis.

The Ute was scheduled to go on sale in America in the second half of
2009 as the Pontiac G8 ST sport truck, but Pontiac has axed the model as
part of General Motors' restructuring plan designed to stave off a
financial collapse.

Holden this morning confirmed that it was given the bad news overnight
by Pontiac, one of numerous General Motors brands that has been the
result of intense speculation over its long term future.

The news comes despite the added affordability of the exports given the
lower value of the Australian dollar.

"We're naturally disappointed about the cancellation, but we understand
Pontiac's decision," says Holden spokesman Jonathan Rose. "Pontiac has
stated that as part of its restructuring it is focusing on cars as
opposed to trucks (utes)."

Holden confirmed in March 2008 that its Commodore Ute would be restyled
and rebadged for the US market.

Holden already exports the Commodore sedan to the US, where it is sold
as the Pontiac G8. It's believed almost 15,000 G8s have been exported to
and sold in the US, but that tens of thousands are still waiting to be
sold as demand in the States wanes. Pontiac had been hoping to sell
double that number in 2008.

The local car maker says exports of the Commodore sedan are not
threatened by the cancellation of the ute, both of which are built at
Holden's Elizabeth plant in South Australia.

"The Commodore export program remains strong," says Rose. "The decision
[by Pontiac to cancel the ute order] doesn't alter the foundation of the
G8 sedan program. The ute was just an extension of that program, and the
GX P will still go ahead."

Pontiac spokesman Jim Hopson has told US media that the GT ST ute has
been axed as part of GM's "continuing vehicle review".

"With Pontiac being more focused on sporty, fun-to-drive cars, we took a
long look at the ST and it didn't fit with what our future vision of
Pontiac would be," Pontiac spokesman Jim Hopson told Automotive News.
"At that point, we decided to not proceed with this vehicle"

Holden won't reveal how many Commodore Utes it had been planning to
export to America, though Pontiac has said that the G8 ST sport truck
was intended to be only a low-volume, niche model. Low volume in the US
can still translate to 40,000 vehicles annually, the target set when
Monaros were exported to the States.

Even if Holden only exported 10,000 Utes to the US and they were sold at
$20,000 - almost half their recommended retail price in Australia - that
would still amount to lost exports worth $200 million.

The G8 ST sport truck was unveiled at the 2008 Detroit motor show last
January, and was to be powered by a V8 engine.

maveri's picture
maveri
Status: Silver Member (Offline)
Joined: Nov 20 2008
Posts: 159
Re: Australians being told we are riding ok

Well, it's taken a while but finally, our government is admitting things are not as good a they wanted people to believe!

http://www.news.com.au/business/story/0,27753,25108552-462,00.html

2 more years of pain so they say - and the rest!!!!

It's sad for all those people who believed their hype and went out and got into further debt.

Now the job losses have started on mass here too.

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