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How will Australia Survive Financial Meltdown?
Take a last look!
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.