Thursday, December 07, 2006

Vanishing Equity

Household debt.
There is, of course, much more that I should/could write about this subject but, as usual, time and effort.

Have noted that "tintin" Rudd has been doing quite well in Parliament question time. I may be wrong but "teflon" John has lost his smug grin, and is beginning to look somewhat uncomfortable... almost as if he is looking into the mirror, and seeing a younger, smarter version of himself.

Ruddy has been pestering the PM about "the economy" and Howard and his team keep repeating the tired and stale old mantra in reply. "The economy is strong." "Unemployment at all time low." "Interest rates are low." ... etc. etc. ad infinitum.

There is one question that really should be asked.

IF "Workchoices" is as successful as they say,IF everybody has a job, IF wages are as high as they say they are, IF the economy is as strong as they claim ..

How come

Households raised a net $34.4b during the June quarter 2006, up from the $22.9b raised during the March quarter 2006. Households borrowed $21.4b from banks (of which $10.0b was for owner-occupied housing and $5.2b for investment housing) and $13.3b from Financial intermediaries n.e.c., (up $3.4b).

Australians have an insatiable appetite for debt which makes them vulnerable to economic shock. In January, consumers held a record 12.6 million credit cards - almost a million more than a year earlier - with an average debt of $2656 a card.
Worryingly, the age of card holders is getting younger. Cultural monitor AustraliaSCAN reports that 46 per cent of 18- to 25-year-olds have a credit card.
The Financial Counsellors Association of NSW reported in 2003 that more than half of 18- to 24-year-olds interviewed had debts of more than $14,000, with a quarter having debts of more than $20,000.
SMH June 2006

Australians have been living in a Fools Fantasyland if they truly believe that Howard and his team of vapid, vacuous branch managers of "GlobalCorp" have the best interests of Australians at heart.

PS. Have just noticed that Guambat Stew has a better, and wider, post on this issue.


Brownie said...

The banks positively encourage us to be debt ridden.

I have received three invitations to become a platinum cardholder and thereby increase my potential debt to $25,000

'just tick the box and return' they say.

It crossed my mind to do it, buy the ticket to Rio de Janeiro and take the rest in cash.

Davo said...

Am still trying to figure out where the "money" has gone... apart from into "executive" Swiss bank accounts and condominiums in Fiji(oops).. the Bahamas.

Greed?? Last year applied the (which) Bank for a loan of $5000 (at 11%)to buy another car. Loan refused as my income was "too variable". The following week received an invitation to happily increase my Visa limit to $12000. (at 19%) mm, can't think why that should be...

Davo said...

The other point that i should have raised , is that "low" interest rates aren't necessarily a good thing. Can remember the days when I could get 10% on SAVINGS.

More encouragement to SAVE, less incentive to BORROW.

There will be a melt-down in the economy at some point. Whether it happens on Howard's watch, or haunts the new Rudd administration will be a moot point for a while.

JahTeh said...

This is how my mother got into so much debt. The National Bank sending out pre-approved increases on her mastercard which we had put a limit on.
The last increase offered to take it up to $13,000 - for a pensioner.
On the other hand, St.George politely declined a $500 increase request from me saying my financial position couldn't support.