Australian economy

[sorchs]

Hi all.
My husband and I are looking into moving our family to South Australia.

I'm from Ireland and witnessed the economy spiral out of control and even though some tried to advise that it was un-sustainable it fell on deaf ears. 'It won't happen here' and 'Sure Ireland is different' were bandied about daily by the majority. It has left our country devestated, broke and with a very bleak future for our kids. So, like many others we're thinking of leaving.

I'm worried though that the same thing is going to happen in Australia.
We had wanted to emigrate four years ago but chickened out One thing we have noticed in that time is just how much house prices have soared (triple in some cases). I've also read a lot of reports on how 'Australia is different' and 'It will never happen here'. I'm sceptical to say the least. I would hate to move my family away from home looking for a better future only to find that we're facing the same problems but just a few years behind.

Any thoughts from anyone would be great,

Sorchs

[twister292]

Australia is not immune to downturns, thats a given. However, the fundamentals driving the Australian economy at the moment are high prices on minerals and commodities, not credit ballooning out of control like what happened in UK/USA.

One thing that sets the Oz government apart is monetary policy...the RBA is a lot more hawkish on monetary policy than the US Fed or the BoE, which is why the interest rates here are much higher than rest of the world.

[stormgal]

Sometimes I think that all Western economies are somewhat controlled by the "powers that be" (I won't elaborate). So although Australia at the moment is not suffering from the downturn, I believe that it will only be only a matter of time before it does.

I'm sad with what happened to Ireland, and I see that it will happen in the US and in the UK as well. I used to think that Oz was immune - well sort of, but then on studying that housing market, I (and many others) have come to realize that it's just somewhat of a replica-to-be of what's happened in the US housing market. Once that housing market collapses (and I believe it will), then the economy will also take a dive. How strong the dive will be is only a matter of speculation.

The good thing about Oz is that it has less people, and dealing with less people always fair better.

[twister292]

in the USA the housing market imploded due to excess supply...in Australia the prices are high because the demand/supply ratio remains tight...

I'm not an apologist, but the management of the economy here is a lot more prudent than the Greenspan/Bernanke -incited credit bubbles...

Moreover, unless demand for natural resources faces a severe downturn, that sector of the economy will remain strong...

[stormgal]

Twister - I hate to contradict you but that is not true. Point in case the law of supply and demand would apply in this case if everyone had the actual money to buy a home. But this was not the case in the united states, nor is it the case in Australia. The *real* demand is in credit - how much money is available to the public and how shady lending practices have become at the global level. Everyone knows, for instance that a big part of the reason why the economy is strong in oz, is because its interest rates are kept at a standard. But that interest rate will eventually become unsustainable -

[sorchs]

Originally Posted by twister292

Australia is not immune to downturns, thats a given. However, the fundamentals driving the Australian economy at the moment are high prices on minerals and commodities, not credit ballooning out of control like what happened in UK/USA.

One thing that sets the Oz government apart is monetary policy...the RBA is a lot more hawkish on monetary policy than the US Fed or the BoE, which is why the interest rates here are much higher than rest of the world.

Hi Twister, thanks for your reply.

I understand where you're coming from I do wonder however about how 'in control' credit is in Austalia. I read a report that would disagree with that. Two quotes:

' According to the ‘2010 International Housing Affordability Survey: Rating for Metropolitan Markets’, Australia is home to 22 of the top 58 most unaffordable metro housing markets in the world. '

'According to this chart, a median-priced property (in Melbourne) will set you back 7.8 times the average Aussie salary... or to put it another way, if you’re earning the average $68K wage over 85% of it will be spent on your mortgage'

I would have thought sensible lending would see borrowing of three times the average wage or 30% of income being spent on your mortgage. Those figures to me point towards a bubble.

There is more at the link below

Money Morning

Thanks also stormgal, I agree with what you've said sadly

[Weebie]

I hate to say this but really Australia is different.

Firstly Australians are far wealthier than Americans or Europeans and have earn in many cases much higher incomes consider also the fact that costs are also much higher here.

Australia's population realistically is centred around 4-5 cities and these cities are big now and getting bigger.

Large Migration, Every man and his dog is trying to get to Australia and with migration comes money and house prices stay up.

[stormgal]

Originally Posted by Weebie

Firstly Australians are far wealthier than Americans or Europeans and have earn in many cases much higher incomes consider also the fact that costs are also much higher here.

I'm sorry, I know you mean well, but I'm not necessarily sure about this, because there are no stats that prove this to be true.

What is wealth? Money in the bank, a stable job, your 401K (retirement), and the ability to be able to take out a loan and buy a home. (If it were the other kind of wealth - like Bill Gates wealth, then Australians wouldn't have to work). Anyway, the great majority of Americans had that just 5 years ago, and even more so during the .com and the housing bubble eras. Once again, it was only until these bankers started with their shady lending practices and over extended credit to those who clearly did not deserve it that the whole system went kabloy.


Now I do believe that Australia is a good 10-15 maybe 20 years behind the US and Europe for that matter, and Americans and Europeans were "wealthier" 20 years ago as well, while Australians weren't necessarily so. But down the road 10, 15 years to the future, and you're likely to see the same thing happen there as well. Why? Because it's the same corporations and bankers that are controlling this whole system. Now that we're all going global, what happens in one area, the other will get dragged along for the sake of politics.

Don't you think it's too much of a coincidence that the financial systems of Iceland, Ireland, Greece, and others have collapsed? As for the UK, I don't even want to go there, you will see how they will be next - the debt they have and the inability to pay it back can give anyone who lives there nightmares for life if they come to find out the truth.


Like I said, it's just a matter of time when it all catches up and the sad reality is, that by that time, there will be nowhere to run. But like some of us have mentioned before, Oz, and even NZ will be in a much better position than the rest of the western world, contingent that no severe catastrophes and lord knows what other earthquakes, or floods don't happen.

[twister292]

Australia's current (trade) account is in surplus at the moment...credit availability is there, but well below the levels that led to the sub-prime meltdown in the USA...there's no concept of a "sub-prime" mortgage here, at least with the big lenders...

House prices are distorted but as such, a protracted retreat is unlikely in the short term considering that demand for housing does remain high due to incentives such as the FHOG from the government...

What many people don't realise is, there will be money flowing in to the economy as long as there is demand for resources and minerals...and there's nothing to support the notion that it will go down any time soon, with chinese and indian demand for steel, coal and other commodities being borderline insatiable at the moment...

[Weebie]

Originally Posted by stormgal

I'm sorry, I know you mean well, but I'm not necessarily sure about this, because there are no stats that prove this to be true.

What is wealth? Money in the bank, a stable job, your 401K (retirement), and the ability to be able to take out a loan and buy a home. (If it were the other kind of wealth - like Bill Gates wealth, then Australians wouldn't have to work). Anyway, the great majority of Americans had that just 5 years ago, and even more so during the .com and the housing bubble eras. Once again, it was only until these bankers started with their shady lending practices and over extended credit to those who clearly did not deserve it that the whole system went kabloy.


Now I do believe that Australia is a good 10-15 maybe 20 years behind the US and Europe for that matter, and Americans and Europeans were "wealthier" 20 years ago as well, while Australians weren't necessarily so. But down the road 10, 15 years to the future, and you're likely to see the same thing happen there as well. Why? Because it's the same corporations and bankers that are controlling this whole system. Now that we're all going global, what happens in one area, the other will get dragged along for the sake of politics.

Don't you think it's too much of a coincidence that the financial systems of Iceland, Ireland, Greece, and others have collapsed? As for the UK, I don't even want to go there, you will see how they will be next - the debt they have and the inability to pay it back can give anyone who lives there nightmares for life if they come to find out the truth.


Like I said, it's just a matter of time when it all catches up and the sad reality is, that by that time, there will be nowhere to run. But like some of us have mentioned before, Oz, and even NZ will be in a much better position than the rest of the western world, contingent that no severe catastrophes and lord knows what other earthquakes, or floods don't happen.

Everything about that post is incorrect and ignorant of Australia and how it operates compared to America which has been on a downwood slope for 30 years.

Australia is a legitimate first world country, America isn't.