Is anyone else concerned about the Australian economy?

[Melbpom]

7 hours ago, Marisawright said:

Where do the UAE get their water from?  Most of their drinking water comes from desalination plants.  There is a limit to how far one can pump water inland from the sea.    It's certainly true that Australia could manage their water better, but it is still a major barrier to development inland. 

 

Exactly. When I visited Dubai even the bus shelters were air conditioned. Environmentally unsustainable.

[Melbpom]

On 18/04/2019 at 01:44, SusieRoo said:

5 years average wages? I think you will find many young people have recently signed up for mortgages at 10 or 11 times earnings with small deposits. These poor souls are going to struggle if prices don’t change, and if there is worse to come, there lives are going to be destroyed. Does this not concern anyone in Australia?

I fully appreciate you have seen it all before, but I fear it’s not going to be so easy this time. Australia now has some of the highest personal debt levels in the world.

Each generation has it's challenges. When we bought the interest rates were 17% and the ratio of house price was still around 4 times the average wage. We bought as a couple because by pooling resources we could buy on the very edge of the city. This was at a time of recession, something that Australia hasn't seen for almost 30 years. 

House prices will drop if interest rates increase but then so will affordability. You can't have it both ways.

[newjez]

16 hours ago, Marisawright said:

There is a limit to how far one can pump water inland from the sea. 

There is no limit, look at Perth to Kalgoorlie, but they is a cost that may make it unfeasible.

[Paul1Perth]

22 hours ago, SusieRoo said:

Very true, but it's our fault! We have created a society that has caused this excessive debt to become normal. How can a tiny block at the end of the track be worth £400,000+ (land only), when Australia is vast and relatively empty. We have allowed big business (and self-serving politicians) to ride roughshod over our children. We have inflated one of the largest debt bubbles in human history. Now we sit back, gloat and blame the millennial generation.

If you mean the baby boomers fault, which I've been told by the generations down, I can't see it. We didn't have things on credit. Saved up and bought things when we could afford. 

Fault maybe lies in us not telling the kids that and letting them get into debt. We have 2 boys and we've made them pay their way from the moment they started work. We used to tell the eldest to put some cash by in case something went wrong with his car. He took no notice until something went wrong and he couldn't get to work. We leant him the money and he paid it back in monthly installments. Good lesson learned. He's never asked for any money since.

 

[newjez]

1 hour ago, Paul1Perth said:

If you mean the baby boomers fault, which I've been told by the generations down, I can't see it. We didn't have things on credit. Saved up and bought things when we could afford. 

Fault maybe lies in us not telling the kids that and letting them get into debt. We have 2 boys and we've made them pay their way from the moment they started work. We used to tell the eldest to put some cash by in case something went wrong with his car. He took no notice until something went wrong and he couldn't get to work. We leant him the money and he paid it back in monthly installments. Good lesson learned. He's never asked for any money since.

 

My nephew bought a dump 6km from the Perth CBD ten years ago.

He rented rooms to FIFO and lived in a 'shed' out the back. Quite nice shed actually. Small but nicely done.

Now mortgage is paid off, he is looking at knocking it down and rebuilding.

He works two jobs. One pays well, the other doesn't but he loves it.

He has done really well for himself. Taking reasonable risks. Not over stretching. 

[newjez]

On 19/04/2019 at 09:54, SusieRoo said:

Very true, but it's our fault! We have created a society that has caused this excessive debt to become normal. How can a tiny block at the end of the track be worth £400,000+ (land only), when Australia is vast and relatively empty. We have allowed big business (and self-serving politicians) to ride roughshod over our children. We have inflated one of the largest debt bubbles in human history. Now we sit back, gloat and blame the millennial generation.

The banks lending practices are certainly questionable.

[SusieRoo]

On 19/04/2019 at 10:30, Marisawright said:

Australia is relatively empty, but there is a very good reason for that - there's not enough water, and the land is too poor to farm.   I used to live in the north of Victoria and it is quite a revelation how dry and barren it is - and that's not even classed as the outback.

There is a scientific definition of "habitable land".  If you apply it to the UK, it works out at 70% of the land surface. If you apply the same standard to Australia, it works out at 10%.

That’s rubbish! Australia is 32x the size of the UK, so even with your 10% and 70% theory, that still equates to 450% more habitable land in Australia. You would have to increase Australia’s population to 299M to reach comparable density to the UK.

I think the problem is that there has been a giant ponzi scam that has created a type of mania in the minds of many people. There was a similar mania in Holland back in 1637, when the price of tulip bulbs became detached from reality.

Today in Australia it’s not tulip bulbs is building land and property. Only problem now, this bubble over inflated by many trillions of dollars and major chunk of the economy became embroiled.

Difficult to determine an exact date when the bubble burst, but it was sometime around the middle of 2017. Now would be a good time to wake up, get a grip and take action, but apparently most people are still in the denial phase.

Edited April 20, 2019 by SusieRoo

[Marisawright]

12 hours ago, SusieRoo said:

That’s rubbish! Australia is 32x the size of the UK, so even with your 10% and 70% theory, that still equates to 450% more habitable land in Australia.

450% threw me for a minute, until I realised it only means 4.5 times!   You have a point.  Sorry, I was assuming that you (like a lot of people) assume the arid inland was also habitable.  

It's true there is over four times as much habitable land in Australia as in the UK, but that's not the whole story.  There is another problem - the carrying capacity of the land. It's one thing for it to be habitable, but at what density?    The habitable part of Australia could never carry as many people per hectare as the UK because there isn't enough water.  

Melbourne and Sydney already have desalination plants, in spite of being built on large rivers. Much of inland Australia relies on groundwater, which is declining - if we built large settlements, it would disappear even faster (as is now being experienced in the Middle East). The Murray-Darling river complex can't be relied upon to feed new towns either - it's already in crisis, with thousands of fish dead due to inadequate water.

There have been lots of studies of the population that Australia could support, with lots of different opinions on the limit, if you're interested.

https://www.abc.net.au/news/2015-06-18/eamus-declining-groundwater-is-a-big-problem-for-australia/6556586

[newjez]

3 hours ago, Marisawright said:

450% threw me for a minute, until I realised it only means 4.5 times!   You have a point.  Sorry, I was assuming that you (like a lot of people) assume the arid inland was also habitable.  

It's true there is over four times as much habitable land in Australia as in the UK, but that's not the whole story.  There is another problem - the carrying capacity of the land. It's one thing for it to be habitable, but at what density?    The habitable part of Australia could never carry as many people per hectare as the UK because there isn't enough water.  

Melbourne and Sydney already have desalination plants, in spite of being built on large rivers. Much of inland Australia relies on groundwater, which is declining - if we built large settlements, it would disappear even faster (as is now being experienced in the Middle East). The Murray-Darling river complex can't be relied upon to feed new towns either - it's already in crisis, with thousands of fish dead due to inadequate water.

There have been lots of studies of the population that Australia could support, with lots of different opinions on the limit, if you're interested.

https://www.abc.net.au/news/2015-06-18/eamus-declining-groundwater-is-a-big-problem-for-australia/6556586

Time to build that inland sea.

https://www.google.co.uk/url?sa=t&source=web&rct=j&url=https://larryhannigan.files.wordpress.com/2017/06/14-lake-eyre.pdf&ved=2ahUKEwje0u2luODhAhUUTBUIHRbeBXoQFjABegQICRAB&usg=AOvVaw3UQrIoTdH0yjJKzAyDQpDQ

Edited April 21, 2019 by newjez

[Whey aye]

On 17/04/2019 at 20:14, newjez said:

The world is not going to end.

But there are times you should take risks and times you shouldn't.

 

Now that is weird,that is exactly what they told me around 40 years ago.

 

Doing a future value calculation then was just as easy as it is now.

Expected growth rate over a number of years, worked out that I thought they would be worth around $400K now.They are worth around 700  -- 750K.

I thought average wages would be around $50K,they are $80K.

 

At a growth rate 6% average compounding then $427K will be around $4.3 million in 40 years.Work out for yourself what you think wages will be  

 

The risk was too great 40 years ago,interest rates were going to rise,unemployment was going to rise.I wonder if I hear that non stop today 

 

Isn' t that weird

Everybody says things were so cheap 40 years ago.In 40 years time every body will be saying  how cheap things were 40 years ago.

 

How weird is that.

 

[newjez]

1 hour ago, Whey aye said:

Now that is weird,that is exactly what they told me around 40 years ago.

 

Doing a future value calculation then was just as easy as it is now.

Expected growth rate over a number of years, worked out that I thought they would be worth around $400K now.They are worth around 700  -- 750K.

I thought average wages would be around $50K,they are $80K.

 

At a growth rate 6% average compounding then $427K will be around $4.3 million in 40 years.Work out for yourself what you think wages will be  

 

The risk was too great 40 years ago,interest rates were going to rise,unemployment was going to rise.I wonder if I hear that non stop today 

 

Isn' t that weird

Everybody says things were so cheap 40 years ago.In 40 years time every body will be saying  how cheap things were 40 years ago.

 

How weird is that.

 

I don't think people are saying Perth house prices were cheap ten years ago.

[Marisawright]

21 hours ago, newjez said:

Time to build that inland sea.

 

But where will the water come from? Libya has built vast artificial reservoirs but scientists are now worried that it will drain the underground aquifers (which took thousands of years to fill).  

[newjez]

3 minutes ago, Marisawright said:

But where will the water come from? Libya has built vast artificial reservoirs but scientists are now worried that it will drain the underground aquifers (which took thousands of years to fill).  

There was been talk over the last hundred years of building a canal from the sea to keep lake Eyre permanently full. There would be benefits, and Australians are good at big projects. Might be necessary one day with climate change.

Edited April 22, 2019 by newjez

[Marisawright]

56 minutes ago, newjez said:

There was been talk over the last hundred years of building a canal from the sea to keep lake Eyre permanently full. There would be benefits, and Australians are good at big projects. Might be necessary one day with climate change.

Building a canal from where?  They're already taking too much water from the Murray-Darling system

[Melbpom]

Withdrawn comment

Edited April 22, 2019 by Melbpom
Withdrawn comment

[SusieRoo]

I don't think the shortage of water has made land prices expensive. It's more about the banks lending too much without doing the proper affordability checks and the insane notion that residential property should be used as a 'get rich quick' scheme. Greedy banks exploiting week regulation while politicians fail a generation of young people.

[grizzly111]

SusieRoo: you can simply Google the reasons. Anyone in the development game knows the real reasons especially regarding land supply. Add in my previous reasons + rising wages + foreign investment + cost of adding services to new suburbs. The Government loves it (taxes & duties). People in Australia don't want to live away from major cities but interestingly land is still fairly highly priced for the average punter in many regional centres....now you build the picture.... 

Regarding the future: nothing is impossible (eg: look at Hong Kong and how they have reclaimed land from the ocean to build on etc).

You reasoning is correct.

[Paul1Perth]

On Saturday, April 20, 2019 at 16:59, newjez said:

The banks lending practices are certainly questionable.

Whilst I agree on this it's another situation where people are looking for someone to blame for their own bad decisions. I suppose there were plenty of people that got out of strife too with low interest rates and lax paperwork.

[Paul1Perth]

On Sunday, April 21, 2019 at 09:59, Marisawright said:

450% threw me for a minute, until I realised it only means 4.5 times!   You have a point.  Sorry, I was assuming that you (like a lot of people) assume the arid inland was also habitable.  

It's true there is over four times as much habitable land in Australia as in the UK, but that's not the whole story.  There is another problem - the carrying capacity of the land. It's one thing for it to be habitable, but at what density?    The habitable part of Australia could never carry as many people per hectare as the UK because there isn't enough water.  

Melbourne and Sydney already have desalination plants, in spite of being built on large rivers. Much of inland Australia relies on groundwater, which is declining - if we built large settlements, it would disappear even faster (as is now being experienced in the Middle East). The Murray-Darling river complex can't be relied upon to feed new towns either - it's already in crisis, with thousands of fish dead due to inadequate water.

There have been lots of studies of the population that Australia could support, with lots of different opinions on the limit, if you're interested.

https://www.abc.net.au/news/2015-06-18/eamus-declining-groundwater-is-a-big-problem-for-australia/6556586

The fish didn't die from inadequate water. There had been heaps of rain upstream just prior to the fish kills. They think the runoff with nutrients from farming reduced the levels of oxygen in the river system. No lack of water involved.

Guess it's something the scientists are going to have to sort out. Airation has worked extremely well for cleaning up Salford Keys.

[Paul1Perth]

On Monday, April 22, 2019 at 10:57, Marisawright said:

But where will the water come from? Libya has built vast artificial reservoirs but scientists are now worried that it will drain the underground aquifers (which took thousands of years to fill).  

There's plenty of water in the North of the country in the monsoon season. Several times it's been talked about how WA in particular could make use of it. 

Colin Barnett copped a fair bit of stick years ago when he put forward a massive canal or pipeline from the Kimberley. 

Looks stupid and impractical at the moment and would cost billions. Stranger, more complex and more expensive Engineering tasks have been done in the past though. Snowy mountain scheme for one, channel tunnel for another. Neither of them would never have been built had aoul case for paying for themselves been made.

We had a decent lecturer at uni and did a pretty simple case study on the channel tunnel costings. The study flowed into the price they would have to charge customers to make it remotely viable. It was obvious that it would always have to be subsidised.

Some things just have to be done though.

[SusieRoo]

A sobering article by Eddie Hobbs in the Irish Examiner, maybe it's time we start adjusting to this ‘new normal’ -

https://amp.irishexaminer.com/breakingnews/views/analysis/eddie-hobbs-fasten-your-seatbelt-the-worst-is-yet-to-come-993618.html

[Toots]

Yes the world is in a mess and seems to be getting worse.  Jeez, I wouldn't get out of bed in the morning if I worried about it all.  OH  and I have seen it all before, though who knows how it's all going to pan out this time around.  I worry for the younger generations.  Many of them live in a world of credit cards and casual work and zero-hours contracts.

[Marisawright]

1 hour ago, SusieRoo said:

A sobering article by Eddie Hobbs in the Irish Examiner, maybe it's time we start adjusting to this ‘new normal’ -

https://amp.irishexaminer.com/breakingnews/views/analysis/eddie-hobbs-fasten-your-seatbelt-the-worst-is-yet-to-come-993618.html

It was odd to come back to this thread and read our comments this time last year.    Up until the pandemic, house prices were still going up (against the gloomy predictions) but the pandemic has changed all that.  The whole world economy is going to be in a horrible mess by the time this is over, and will take many years to recover.  Some economists are saying we're headed for another Great Depression.  It won't just be Australia, though, it's everywhere.

[SusieRoo]

Yes, Australia’s monumental debt bubble had created an imminent property crash before the virus. Covid-19 was just the pin.

I don’t think many people really understood what risks were already present in Australia. I’m no expert, but I do have first-hand experience of a real property crash. It makes me very focused on issues I would never have previously considered.

Eddie Hobbs has written much about the aftermath of the Irish property bubble and the devastating effect if had on people’s lives.

Australia is different… not because it wont happen, but because the bubble is so much larger.  

Edited May 16, 2020 by SusieRoo

[davlap]

The thing that makes me mad, again, as with the GFC, is accountability. People stack up credit. Banks give it because it makes them more money.

People got themselves into debt. the bank's shoddy practices and need for profit growth allowed this. Banks are being forced to account for some of this, along with refunding obscene charges and compensating for bad advice and other rip-off methods.

But, what about the people themselves who stacked up the credit? They should have known what they were doing, what the charges would be. They get a nice credit holiday. Near zero interest rates. So what do they do? Take on more credit, buy houses they can't afford. What happens - house prices go up. 

People like me, never in debt, saved and bought what I can afford. What do I get. Savings that lose money, go backwards because inflation beats the interest rate. What do I do. Look for investments. Solid bank shares that pay a divided. Oh look, I'm an investor, I want the bank to make more profit. Maybe I buy an investment property, those prices are rising nicely.

Unfortunately, what I do is sit on cash, because I hate all that. Watching exchange rates, share prices. Unfortunately, now looking at retirement, I will struggle unless I get my money to pay its way.

I also thought Oz was in a housing bubble, far more likely to crash. However, I am also looking at going back to UK to retire. Have you looked at property prices there? A three bed semi where we used to live now costs 350GBP. Their prices were rising just before covid as well.

In the good old days, I would be laughing. Super high interest rates at 10/15%. House price crashes. It would stop the credit junkies in their tracks. People who couldn't afford it would have to wait until they could. Offload the assets that are crippling them, the ones they should never have got in the first place. Hopefully the rental crash might force investors to sell up.

What will happen though, is low interest rates will stay for years. I can't see that has worked before, but they persist with it. People who do have anything and are not in debt will be paying for this for years. Services will be cut, pensions and the rules will be tightened. A bleak outlook for somebody in my position.