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How will Australia Survive Financial Meltdown?

Updated on April 1, 2009

Take a last look!

The good old Aussie dollar, soon to go the way of the USD down the drain.
The good old Aussie dollar, soon to go the way of the USD down the drain.

Is Australia going to survive Wall St?

Australia started by injecting 4 Billion dollars.

The Federal Government injected 4 Billion in to Sydney's western suburbs mortgages hoping to ease the plight of homeowners.This has done nothing more than put a small patch on a big puncture.

That is chicken droppings.

Elicit drugs did 4 to 12 billion dollars last year in Australia!

Our reserve bank drops interest rates but the banks can't be forced to follow.

If interest rates get too low, the Banks will be selling money for less than they paid for it.

It is also being touted that this AU$ injection will save the non bank sector with little or no risk by holding prime mortgage paper from the banking sector as security. A large part of the non bank mix across Australia does have high quality property behind this paper. Trouble is it is still overvalued property.

The other looser paper like low interest credit cards have locked the doors already, and forget about any low or non-reporting loans and similar product being available.

As usual the very poor are worst hit.

The Rudd Labor Government has stepped in to help the poor spend at Xmas time to help struggling retailers, and the package will see the poor pocket at least AU$1,000 each. How far this will go to helping shops keep staff and liquidity is still a moot point, as surveys have shown that most of it is going to be used for debt reduction.

It is going to be a lean Xmas for our retail sector in my view, despite this massive injection. I applaud them doing it anyway as reducing debt is not a bad thing. People will use it to pay their Electricity bill, Gas bill etc and so will survive at home a bit longer.They will also use it to pay down the huge household credit card bills from last Xmas too!

The very poor have been surviving life's dramas by buying these credit card products for years. Many banks have been charging nearly as much as the legal limit for interest rates, so paying some amount of them will increase retained income and that has to be good.

Credit card debt has been used by the poor mainly to pay for family events that they have not been able to save for.

The Australian public must not relax in the belief that the worst is now over and the beast captured. "She'll be right mate" thinking must not slip in.

We are not out of the sub-prime fiasco because our banks were in the sub-primes up to their goolies and like in America and England the taxpayer must thump hard on the ground before these banks raise their heads. Most will only admit to the extent of their debt when they are exposed by their own bottom line at reporting time.

In Australia International banks are closing with barely a whisper from the press, the economy is about to kick itself in the head yet again with the consumers saving every cent they can to pay the credit card debt along with huge mortgage payments and cost of living blowouts.

We urgently need hundreds of billions spent on water and energy, we are in the worst of draughts over most of the country and our government is about 1.29% better on a good day than the crooked lying bunch we just threw out.

It takes a crisis for the pollies to show their true colours.

Since the sub-prime meltdown out politicians have been shown to be just as clueless as the USA who are being advised by Donald Duck, or have so much money tied up in the outcome that their apparently dumb-arsed reasons are more sinister. Self serving greed.

We need some leadership and new fiscal solutions to keep some of what we have now in Australia. It is going to be a very rough ride for America and England because of the size of their economies.

We are not immune to any of it.

The 18 Billion we had in reserve is gone, spent on rescuing our finances. We have ear-marked most of it already for sub-prime repairs, and Guess what...... it won't help at all.

Leamans disappeared in Australia with hardly a sound from the press, Government house has closed the doors for a very long break as usual, with all the problems still floating around and not a solution in site.

The Government has just announced a big spend on roads and other traffic infrastructure. What's the bet we get more toll roads?

I still believe this debt should be sat squarely on the shoulders of the banks.

We, the Australian public cannot afford it. If the banks are given time, they can pay back the debt that is rightly theirs, or fall over. No loss if some of them go. We have far too many anyway. No Government will do it though. Too many deals inside the Government with the bankers lending for all sorts of joint projects.

What I am afraid of is going passed a recession next year when some more of the stuff hits the fan about February and we risk a full blown world-wide depression. That could last for twenty years or more as we stop buying all China's junk, they will only have their domestic market to sell in to and if they start hurting bad we are stuffed.

No one has a remote idea of how deep the trench is yet, and we are all left guessing as to what will happen when the whole picture emerges. I for one think that as the same brain dead lot will still be running treasury here , in England, Europe, Russia, China and the USA we are in for it.

Spend our way out?

The same old stuff of interest rate cuts will not support our economy this time around, just as it will not anywhere else in the developed world.

Interest rates need to be reasonable but not ridiculously low. If the reserve bank rate is very low banks can sell cheap money, but only if they can get it and someone wants to buy it.

Fuel prices have dumped, but not at the pump, and refining costs will only get more expensive as environmental costs are recognised and costed properly.

Fuel prices will go back up because of refining and consumptive taxes related to the pollution process from ground to burn.

Food is still crazy expensive in relation to farm gate prices here in Australia.

The only cheap food is imported, some full of crap, most tasteless.

Rent is still 2/3 of an income or more and getting harder for singles and the retired if they need to be within transport range of facilities.

Our new Labour Prime Minister Mr. Kevin Rudd must inspire his Government to get something done about the economy quickly, to avoid the recession the poor are already deeply in worsening and widening quickly.

Maybe we could do something if we:

  • Build large infrastructure in transport. It is urgent and labour intensive.
  • Use more environmentally friendly power generation

This has enormous scope to spend on long term cost saving.

  • Develop some new industries around fuel cell, water technology.
  • Tax relief are well overdue for R&D for alternative electricity supply.

These and other undertakings would lessen our slowdown. So would a large increase in pensions and health.

Our pensioners used to eat dog food in hard times, now they can't afford to anything. It costs about $3,000 to keep a dog for the year with food and other costs.Many older people who live alone are supporting a dog or cat for companionship making them even poorer.

Our pensioners will spend every cent they get back into the economy straight away. Pay the rent. Pay the gas and electricity bills, buy food and other such luvuries.

This may not pay for the above but it will help, and long-term cost saving that creates industry and employment could help, along with decent tax cuts for the middle class, who are becoming poor real quick at the moment from every angle.

If we spend our way out we will see it back quickly when the rest of the world recovers and spends up big on our resources.


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    • earnestshub profile imageAUTHOR


      9 years ago from Melbourne Australia

      Thanks bubboo, I reckon that nothing has changed, Australia will cop it hard. Our economy is so tightly tied to the aaa paper.

      In the past you will recall that every time America's economy sinks, ours sinks too.

    • profile image


      9 years ago

      At last I am reading some common sense. Australia was, and has never been immune to the financial crisis, even though I wish it weren't so because I live there. I have been trying to tell my friends and family this to prepare just like the Americans and the rest of the world because it WILL hit us sooner or later but everybody here has the attitude that 'It can't happen in Australia" I wish our Country (like China and Russia) would start buying gold, (probably don't have the money). We are going to be SO poor here!!! like everyone else.

    • earnestshub profile imageAUTHOR


      9 years ago from Melbourne Australia

      AEvans, you and those like you make America great. I wish your politicians had more spirit and soul in their decision making, then they could match their own people. I noticed that you commented on my hub "how to get her to like you" and your comment warmed my heart. It is the nicest thing to hear from a woman, that she loves her man.

    • AEvans profile image


      9 years ago from SomeWhere Out There

      earnesthub, Thank you for your support as we will survive as our family sticks together and our love for one another is strong. I would rather have my husband and son , family and close friends then all of the riches of the land. Home is where your heart is.:)

    • earnestshub profile imageAUTHOR


      9 years ago from Melbourne Australia

      Misha, I hope we do survive better, but I have my doubts still for Australia. We have not seen our banks hand yet, they are still in denial here and the 19 odd billion we had in reserve is already spent.

    • earnestshub profile imageAUTHOR


      9 years ago from Melbourne Australia

      AEvans. So sorry that you and your family have taken a hit that should have landed elseware.

      All my love and thoughts are with the new and old poor of the western world.

      It is little comfort I know, but Australia is going down the same drain. I hope some day that the filthy rich bankers who are never satisfied with what they have and have now stolen your money and mine get what they deserve. All the best to your husband, I hope he makes a full recovery soon and with your love will find a way to get through.

      My best to you and yours.

      Come to think of it they already have. While you and your friends and family stick to each other through thick and thin, these glad handers friends will be gone in a second as soon as any one of them loses any power or money. Lets be grateful we are not like them and have real people in our lives.

    • Misha profile image


      9 years ago from DC Area

      Oh yeah Eric, I completely agree it's gonna get much worse before it gets better. All I am saying it will be much worse in USA than in Australia.

      Julianna, you are in a terrible situation, poor thing. I am afraid the only feasible option is to move to something way smaller :(

    • AEvans profile image


      9 years ago from SomeWhere Out There

      Eric, I agree with you on that as I have to be honest my husband was laid off suffered a heart attack and now we are one of those people. We were not sub-prime borrowers and we did not finance more then we could afford so right now we are one of those americans amongst others who are in trouble and it really doesn't feel good, especially with the holidays and a child. We are also watching our credit score plummet and our bank has offered a loan mod, but I am the only income and apparently my petty money doesn't cut it for them, I wish God would send us an Angel right now as talk about stress. So I agree our government should be helping as they made this mess to begin with.

    • Eric Graudins profile image

      Eric Graudins 

      9 years ago from Australia

      Misha, it's true that we are in a better situation than the US.

      But the financial markets are intertwined, and I fear that we're in for a good kicking as the next few chapters in the financial debacle play themselves out. I think the worst is far from over, despite the best effors of the whirling dervish spin doctors.

      Even Blind Freddy can see that you can't fix the problems caused by too much cheap money by throwing virtually unlimited extra cheap money into the pot.

      It would be far better for the US Govt. to give the money to the people so that they could pay their mortgages, instead of funding the mongrels at the banks who were the main cause of the problem in the first place. Our whole financial system is cockeyed.

      By the way - can you buy gold in the US at present? You can't in Australia. The foundries are working 24/7 trying to meet back orders!



    • Misha profile image


      9 years ago from DC Area

      You guys will survive just fine, you are in a much better shape than USA :)

      - you don't fight two wars and are not thinking about starting the third one;

      - you do not pretend to be a Democracy Flagship and World Police at the same time.

      Those things are a serious drag on a national economy, you know :) So I bet you'll be hit way less than USA...

    • AEvans profile image


      9 years ago from SomeWhere Out There

      Good Grief, Greed is all over the world I have a feeling that our Country started this mess, as I don't understand how one country can be affected as badly as the next. Politics is my weakness and I am certainly glad that I am learning something new everyday, thanks for writing this. :)

    • Eric Graudins profile image

      Eric Graudins 

      9 years ago from Australia

      Now we're being told to spend, spend, spend to save the economy.

      Buy more of the crap that we don't need, with money we don't have.

      I think I'm going to throw up.

      I love cars too, but recognise that the rot set in for the industry when cars became a lifestyle statement instead of a means of transport.

    • earnestshub profile imageAUTHOR


      9 years ago from Melbourne Australia

      Thanks for the comment agvulpes

      I reckon they have got a fair start on that already. We can look at five years of poor retail sales cash will be king and gold or oil dead set dangerous for the new investor.

      The only thing that will bring food and health prices down will be achieved by better education of the GP about agriculture, emissions environment and must include real freight costs including costs the depletion of resources and environmental destruction. We are more likely to just get more propaganda.

      Even if out shiny new Government are learning about the real issues they still have to sell them to an ignorant public.

      It is the right of every Australian or American to be as ignorant as bat shit, but they do have a vote.

      The press in both countries are so self interested and gutless that we will not be getting much relief there either.

    • agvulpes profile image


      9 years ago from Australia

      So is Australia going down the same path as the US did and buy up the 100% financed mortgages and are now only worth about 60-70% and getting worse by the day. So then the Aus banks can go broke like the US banks.


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