how are things looking down under?

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ed65love's picture
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Joined: Mar 10 2009
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how are things looking down under?

I've nearly finished the video course, and am utterly fascinated! I'm curious, are we in as bad shape as the USA? I'd say not, but I don't know for sure.

I know fractional reserve banking applies nearly worldwide, so we can't hide from that mess. I'm just wondering if our debt situation is quite as bad.

Maybe it won't matter when the US collapses, due to the domino affect.

I'd still prefer to be down under, where people are less fearful, there are less guns, better weather, and we produce a big surplus of food.

Please share if you have any insights.


Tesseractal's picture
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 Just to get the discussion

 Just to get the discussion going:

- I think your domino reference is the key.  While Oz may have good internal fundamentals in the banking sector etc. the reality is that we are dependent on Asian manufacturing to drive demand for our raw materials and ultimately our economic performance.  Bad economic climate in US means demand falls leading to reduced trade with China and thence Australia.  China does not have the wherewithall to replace foreign deamdn with domestic demand.  Insulation is limited!.

- The so called stimulation package of the current administration didn't do much!   Governments always seek out positive endorsement of their actions but the simple reality is that it was unnecessary at the time (especially measures like bank guarantees which just caused a consolidation of the home loan market) and ultimately this means that we have spent the buffer we should have reserved for further down the track and or put it into major infrastructure rehabilitation and development programs.  Powder used too soon!

- there have been suggestions that the property market in Oz is also inflated.  Reduced demand for Oz exports means loss of jobs and consequent mortgage risk.  The big impact here is that the Oz mortgage market is unlike the US market - i.e. if housing prices fall to the point of negative equity a greater portion of the risk is carried by the borrowers - no going to the bank, handing over the keys and washing your hands of the obligation.  I suggest that this means the impact of any market collapse and the consequent bankruptcies will be longer term.  Banks will face increased domestic risk.


- yes Oz does have a food surplus but it always pays to look at the composition.  Increased engagement and intergration with the global economy means Australia is a net importer of products like processed seafood, processed fruit and vegetables, oil & fat, bakery products, confectionary. soft drink & cordial syrup etc.  Australia is also heavily dependent on seasonality for supporting a lot of production - export oranges during the northern winter and import them during the Australian winter - in the case of oranges it actually works out that a lot more are imported than exported.  Similarly for some other fruit and vegies.  If there were an extreme breakdown in the global economy or huge price in transport (fuel) costs it would mean changing what's eaten, when it's eaten and ultimately the price (up and down) - no oranges during winter and prices at the start and end of harvest are likely to be much higher etc.


Damnthematrix's picture
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It's the oil mate......

Australia's biggest problem is, in my opinion, Peak Oil.  Australia peaked eleven years ago, and is due to totally run out before 2020 at current consumption rate.

Australia, with its low population density and scattered settlements separated by huge distances is utterly dependent on oil fuels for the delivery of goods and food.  Martin Ferguson, the energy minister, is worried about the rising cost of oil causing large trade deficits in the future as we import more and more of the stuff, but the notion of running out and NOT being able to import oil soon hasn't even sunk into his tiny brain!  At least not publicly.  It seems no one has told him about the Export Land Model....

The last twelve months have shown how vulnerable this country is to Climate Change......  Will AGW worsen our weather patterns in the future?

Yesterday's news that Bluescope were going to close two steel plants and sack 1000 workers after losing more than a billion dollars is a sign of things to come.  Our two speed economy is a croc.  It's also a sign of Limits to Growth...  as soon as it becomes impossible to extract resources, any resources, fast enough to meet demand, the price skyrockets causing inflationary pressure on manufacturing.. and consumption drops.  without growth, it becomes impossible to repay debts, and as Steve Keen constantly tries to remind us, Australia's debt to GDP is just as bad as everybody else's, might get worse real fast if companies like Bluescope shut up shop.

IMO, the Australian economy is just as doomed as all the others... it just might take a few extra months to collapse!

I suggest all Australians here join


Damnthematrix's picture
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Bankers predict 100,000 jobs to go

Bankers predict 100,000 jobs to go
The World Today
Michael Janda and staff

New forecasts from investment firm Bank of America Merrill Lynch say another 100,000 Australian jobs could be lost from the economy by March next year.

The research also predicts unemployment could rise from 5.1 per cent to 6 per cent over the next six months.

It says that means the Reserve Bank will have to cut interest rates by November.

The analysts say financial conditions in Australia are now as tight as at any time since the 1990s.

The bank followed economists at Westpac, Goldman Sachs and Deutsche Bank in predicting a rate cut after the unemployment rate rose unexpectedly in July.

Federal Treasurer Wayne Swan concedes there will be further job losses in the Australian economy.

Yesterday, BlueScope Steel announced it would cut 1,000 jobs and end steel exports.

The company blamed the Chinese yuan, saying the currency was artificially low and meant importing Chinese steel was cheaper than buying local products.

Mr Swan has admitted there will be "painful adjustments" ahead for some sectors.

"Well certainly there will be changes in employment, there are changes in employment across sectors all the time. Our economy has evolved over years and there are always changes in employment," he said.

Prime Minister Julia Gillard says she is not going to endorse Merrill Lynch's forecasts.

Damnthematrix's picture
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Australia's Housing Affordability "Outrage"

Australia's Housing Affordability "Outrage"


There is mounting concern in Australia about the nature and extent of country’s housing affordability crisis. Expressions of distress are not limited to the middle income households who are locked out of the Great Australian Dream of home ownership. There is heightened interest from advocates of low income households and an opposition political party. Moreover, Australia's overvalued housing is receiving renewed attention in international circles.

Part of this attention is attributable to the 7th Annual Demographia International Housing Affordability Survey, which was released in late January. The Demographia Survey, which I co-author with Hugh Pavletich of Performance Urban Planning in Christchurch (New Zealand) covered 325 Metropolitan markets in seven nations (United States, United Kingdom, Canada, Australia, Ireland, New Zealand and Hong Kong, in China). The Survey assesses housing affordability using the United Nations and World Bank recommended measure of median house price divided by median household income (the Median Multiple). The data shows housing to be severely unaffordable in Australia, which was the most unaffordable nation included in the survey.

In response, Michael Perusco of Melbourne's Sacred Heart Mission and chairman of the Council to Homeless Persons called the affordability statistics "alarming.“ He added he was not surprised by the housing affordability data, noting the stress on the people he serves caused by inflated prices.

Kirsten Moore recently reported in these pages on the statement by the Australian Green party. Senator Scott Ludlam, the party's shadow minister (spokesperson) for housing called Australia's housing affordability a "world-class outrage." He went on to say "When a family or an individual has to spend so much of their income on paying their mortgage, it has a seriously adverse affect on their education and training opportunities, on their investment opportunities and on their ability to pay for services like health care and child care."

The real estate industry also expressed concern. David Airey, president of the Real Estate Industry Association of Australia issued a statement in response to the Demographia Survey, saying that: "for the majority of Australian families the difference between household income and loan payments is narrowing quickly."

Various measures indicate that households with mortgage payments equaling 30 to 35 percent or more of their gross annual income on mortgage suffer from “mortgage stress." Mortgage stress has been spreading around Australia like invasive species. Last year's Demographia Survey showed that the median income household in Sydney would pay 57 percent of its income for a mortgage if it bought a median priced house in the current market. In Adelaide, the figure would have been 47 percent. Over the last year things have only gotten worse.

This is not merely a response to growth, or economic vitality. The median income household in the vibrant Dallas-Fort Worth region, for example, (larger than Sydney) would pay approximately 17 percent of their incomes for a mortgage on the median priced house. This is despite the fact that population growth and the demand for housing has been much greater in Dallas-Fort Worth than in Sydney (Figure 1).


In Indianapolis, similarly sized to Adelaide and growing faster, the median income household would pay 14 percent of their income for a mortgage on the median priced house. House prices have risen more than 130 percent relative to incomes over the last three decades in Australia's major metropolitan areas (Figure 2). By comparison, the increase has been only one-eighth as much (16 percent) in the United States.

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