Which way is the economy heading?

[VYBerlinaV8]

Based on what I'm seeing today, I think we're at least 5 years from what I would call a genuinely booming economy.

I don't think the economy is currently in the toilet, though. Things aren't great, but they aren't so bad either. This is 'normal', albeit at the slow end of the spectrum.

 

[rambada1]

And confusion reigns, look at the posts here. And with confusion, lack of confidence.
I don't think we appreciate the breadth of small business. Each GP is a small business, the gvt provides bulk billing that feeds into the economy and keeps the wheels of cash flowing. Now a lot of Drs are going towards bigger company owned surgeries and PAYG - why? Lots of reasons but I think this is an example of whats happening in small business. Every one is significantly risk adverse. Where as previously if you lost your job, you'd consider some form of small business (well most people) be it a franchise or whatever, and there is usually 2 sources of income into house holds which is diminishing now - more insecurity.
Even Warren Buffet has stated that the share market is to high in the USA - and that 2014 may be interesting.
If you had the choice now to buy into a small business or an IP (preaching to the converted ) which would you do now? I don't think we know where this is going to take us. And until that optimism returns, Australia will struggle, pessimism and insecurity is an anathema to us ('she'll be right, screw it just do it'), and we don't like it or know how to handle it.

 

[Tony3008]

As Joe Hockey said yesterday, it has taken them 3 months to sift through the lies and deceit and to find out the true state of the books....and it's ugly....and people would be wise to change the expectations they demand of Govt.

Government debt is about $300bn. That translates to around $14K per person. Debt isn't bad in itself - virtually all of us here borrow to acquire assets; borrowing across the economic cycle to finance consumption (in its widest sense) is. The government's actions so far show that they really do not have a problem with running a deficit at the current level.

The ugliness isn't IMO down to government finances but external factors that no government can control, in particular the slide in the dollar, welcome for some, not for others and too late for Holden and a good few others. For my micro software business selling back to the UK, my AUD income has gone up 25% in six months; if you're importing goods priced in US$ your supply cost in AUD has gone up by 20% in the last year. If my limited economics are right, at some point this will turn into unacceptable inflation and interest rate rises and a good few people have borrowed on the basis that current rates are the new norm. Then it will be ugly. Time will tell.

 

[Dazz]

Government debt is about $300bn. That translates to around $14K per person.

Strictly speaking, per person, you're absolutely correct.....but then when it comes to this subject, including all of the tiny babies and children at school, they aren't about to chip in to pay off the debt via taxes. Nor are the elderly.

We've got 4 million kids under 14 who pay no taxes, and a further 2 million adults over 70 who also pay not a lot in taxes. Those 6 million "persons" shouldn't really be included either.

Of course, chipping away at that debt has proven extremely difficult, especially with running all of the necessary health, education, infrastructure and welfare programs.

The call for more funds never ends.

Every single "expert" you speak to, no matter which big spending area of the economy you speak to, all say the same thing. We need massive Govt injections of money to provide better products / services. The demand currently has pushed the Budget waaay into deficit, and all proponents want it to go further into deficit ??

It's nuts. People are not prepared to back off with their demands on Govt services. To hell with the Budget or the debt, doesn't affect them personally. Bring on more debt.....no worries.

Currently, the Govt has been left with huge deficits, the likes of which the country has never seen before. None of the debt is ever going to be paid back until the budget is brought back into surplus. They are currently searching everywhere to trim costs and increase revenues just to get back to the break even point, let alone start addressing paying back the accrued interest and principal debt.

Reducing it down to "every tiny baby" and everyone else simply has to pay back a paltry 14K does no-one any good in coming to terms with grappling with this monster debt.

Australia has never faced this problem before.

 

[Tony3008]

Currently, the Govt has been left with huge deficits, the likes of which the country has never seen before. None of the debt is ever going to be paid back until the budget is brought back into surplus. They are currently searching everywhere to trim costs and increase revenues just to get back to the break even point, let alone start addressing paying back the accrued interest and principal debt.

Reducing it down to "every tiny baby" and everyone else simply has to pay back a paltry 14K does no-one any good in coming to terms with grappling with this monster debt.

Australia has never faced this problem before.

In money terms, OK. But as a proportion of GDP current debt is nowhere near where it has been in the past https://theconversation.com/the-truth-behind-our-dangerous-public-debt-levels-13245 . But most of us are where we are because we've lived within our means and the government should do so to over the economic cycle.

 

[Aaron_C]

How is peak debt during WAR TIME comparable to now when we have had the biggest economic boom without war?

 

[BayView]

Strictly speaking, per person, you're absolutely correct.....but then when it comes to this subject, including all of the tiny babies and children at school, they aren't about to chip in to pay off the debt via taxes. Nor are the elderly.

We've got 4 million kids under 14 who pay no taxes, and a further 2 million adults over 70 who also pay not a lot in taxes. Those 6 million "persons" shouldn't really be included either.

Of course, chipping away at that debt has proven extremely difficult, especially with running all of the necessary health, education, infrastructure and welfare programs.

The call for more funds never ends.

Every single "expert" you speak to, no matter which big spending area of the economy you speak to, all say the same thing. We need massive Govt injections of money to provide better products / services. The demand currently has pushed the Budget waaay into deficit, and all proponents want it to go further into deficit ??

It's nuts. People are not prepared to back off with their demands on Govt services. To hell with the Budget or the debt, doesn't affect them personally. Bring on more debt.....no worries.

Currently, the Govt has been left with huge deficits, the likes of which the country has never seen before. None of the debt is ever going to be paid back until the budget is brought back into surplus. They are currently searching everywhere to trim costs and increase revenues just to get back to the break even point, let alone start addressing paying back the accrued interest and principal debt.

Reducing it down to "every tiny baby" and everyone else simply has to pay back a paltry 14K does no-one any good in coming to terms with grappling with this monster debt.

Australia has never faced this problem before.

And, everyone here on SS would be more in debt than $14k - except China.

 

[Tony3008]

How is peak debt during WAR TIME comparable to now when we have had the biggest economic boom without war?

I wasn't citing war/post-wartime figures. As a proportion of GDP debt is much the same or slightly lower than the mid-1990s and interest payments are a third of what they were during that period. 'Australia has never faced this problem before' is just not true. We've not had a boom; we've had a resources boom and a lot of other workers have paid the price - manufacturing jobs exported and Shepparton fruit growers grubbing up productive trees as the high dollar has taken its toll. An effective 20% devaluation from the dollar's high may reverse some of the damage but not all.

From yesterdays' Australian: "Coming a day after Treasurer Joe Hockey promised dramatic fiscal surgery in May to avoid a decade of budget deficits, Mr Stevens said there wasn't a case for a pronounced discretionary contraction in the budget in order to meet a "particular target date to be at a particular surplus or deficit"."I do not myself feel that the debt dynamics we face require us to adopt that level of austerity," he said.". Hockey's strategy is to paint a really bad picture partly so come the next election he can paint himself as the great rescuer and partly so he can drive through some massive cuts and tax changes next budget. I will be very surprised if he doesn't take an axe to NG: lots of money to be saved and those adversely affected aren't likely to change their votes come the next election.

 

[TMNT]

the current market sentiment is very interesting

you have a lot of optimists and even experts saying we are as healthy as can be and economy has been slow in the past couple of years but is about to boom,

on the other hand you have realists and other experts saying our national debt is too high and going to get worse, retail is stuffed, hosptiality is stuffed, auto is stuffed, mining has flattened out, carbon tax fall out, big companies closing, small business really tough

 

[Scott No Mates]

on the other hand you have realists and other experts saying our national debt is too high and going to get worse, retail is stuffed, hosptiality is stuffed, auto is stuffed, mining has flattened out, carbon tax fall out, big companies closing, small business really tough

have a good read of: theguardian.com/news/datablog/2011/jul/15/us-debt-how-big-who-owns
or
en.wikipedia.org/wiki//List_of_countries_by_extetnal_debt (this is total debt not just govt).

We have very little debt per capita or by whatever other measure you care to use.

Admittedly our debt has spiralled in the 3 years since 2010. Who was at the helm? Strong financial management my @rts.

Prior to that between 2002 & 2009 it was between $9b -$10b.

 

[tambourineman]

household debt?

 

[Crabnet]

http://www.abc.net.au/radionational/programs/saturdayextra/2013-in-review/5155134
This mornings Radio National Saturday Extra reflect on Australia at the Crossroads.

Ross Garnaut
Vice Chancellor's Fellow and Professorial Research Fellow in Economics at the University of Melbourne and distinguished professor of economics at Australia National University.

George Megalogenis
Journalist, political commentator and author

As 2013 comes to an end, Saturday Extra reflects on the tumultuous year it has been, with the changing of the guard three times at the Lodge and the major changes in policies this has brought with it.

How has the new coalition government performed so far and what policy areas should be prioritised?
What needs to be done to prepare ourselves for another 10 years of growth?
Is this generation of Westerners the first to anticipate that things will be worse for the next generation?

 

[grand dad]

It's not all doom and gloom.

Last week the RBA Governor appeared before a parliamentary committee and made dovish remarks about the direction of interest rates, hinting that they may even come down. This is a sign that the recentproperty bull market has a long way to go, especially for laggard suburbs in major cities.

http://www.news.com.au/national/res...uld-fall-further/story-fncynjr2-1226785630821

 

[TMNT]

have a good read of: theguardian.com/news/datablog/2011/jul/15/us-debt-how-big-who-owns
or
en.wikipedia.org/wiki//List_of_countries_by_extetnal_debt (this is total debt not just govt).

We have very little debt per capita or by whatever other measure you care to use.

Admittedly our debt has spiralled in the 3 years since 2010. Who was at the helm? Strong financial management my @rts.

Prior to that between 2002 & 2009 it was between $9b -$10b.

interesting, those links dont seem to work for me, so debt was $9b-$10b at the peak of the market just before a economy/property market crash, so without simplyfying it too much, is increased/increasing debt a good indicator of a crash?

 

[grand dad]

interesting, those links dont seem to work for me, so debt was $9b-$10b at the peak of the market just before a economy/property market crash, so without simplyfying it too much, is increased/increasing debt a good indicator of a crash?

Historically, debt (as a % of GDP) is more than manageable. No crashes ahead anytime soon.

Of course, it would have been a lot better had our last federal government been less profligate.

 

[DEC]

From the broken wiki link above
And thats ALL debt

 

[yellina]

Dear All,

In my opinion, Real estate market will see a rise of 5 - 7 %. I was reading post from 2012. Most of them says, the property prices will crash in 2013 and we should be seeking alternative investments. I didnt sell any of my properties.

Suprisingly, Melbourne properties has gone up by 8%.
Share market increased by 4600 to 5200.

In USA the share market is gone up and up. Hopefully, we can see some good news reflecting in Australia.

With the low interest rates, which are going to stay for a while. I could for see good times in 2014.

Thank you
Hari Yellina

 

[tambourineman]

From the broken wiki link above
And thats ALL debt

Things aren't looking good in Ireland , 1000 percent of GDP!

 

[grand dad]

Wikipeda, although useful, is not the most reliable source for economic ratios.

Digressing, the economic environment for property investors is good. The RBA chief last week said that they are considering further cuts (no mention of a rise) and that means we have over a year of good weather ahead.

Recession? We are unique in not having one for over 20 years. And each of the last recessions that we had, property prices actually rose.

 

[Truly Exotic]

canada and qatar are looking pretty good!