Last night at a gala dinner held at The Rocks in Sydney, Nobel prize winning economist Sir James Mirrlees voiced his professional opinion that Australia’s high wages cannot be sustained and must move closer to countries such as China, otherwise unemployment will continue to steadily grow as capital leaves the country.
“If you try to hold it back, if you try to keep the wages high then that is going to be mean growing unemployment,” he said at the event hosted by The Macquarie Graduate School of Management.
Sir James Mirrlees speech follows last Wednesday’s release of wage price data from the Australian Bureau of Statistics showing wages are growing at the slowest pace since the index started seventeen years ago in 1997. Wages grew at an annual rate of 2.6 percent, a rate slower than inflation.
Australia’s high cost economy is having dire consequences for the manufacturing sector most represented by the closure of the 90 year old Automotive Industry. On any particular day, there is a report of another business closure. Today, bus manufacturer Custom Coaches was placed in Administration threatening 100 jobs with the closure of its Adelaide and Sydney operations.
Earlier this month, The Boston Consulting Group released its Global Manufacturing Cost-Competitiveness Index tracking production costs of the World’s 25 largest goods-exporting nations. The index, which measures four critical aspects of manufacturing competitiveness – wages, productivity growth, energy costs, and currency exchange rates ranked Australia at bottom place of the top 25 countries. The findings are consistent with OECD data released last year showing Australia’s relative unit labour costs have surged 54.1 per cent since 2000, while for comparison, unit labour costs fell in Germany, UK, US and Japan by 14.6, 20.4, 25.9 and 46.2 per cent respectively. Some of this is attributable to our stubbornly high Australian dollar and our bad bout of Dutch disease.
But it is not only manufacturing jobs being hit. Multinationals are being forced to close up and move back office administration and finance off shore as high wages and commercial rents take their toll on business sustainability. Miners are turning to automation such as driver-less trucks, either autonomous or remote control, to rid cost as commodity prices slump.
Either way, falling wages or the lost of jobs is likely to result in falling living standards and could have a material effect on Australia’s housing bubble and household debt levels.
Last November, Treasury’s chief economist David Gruen told a conference, “Our estimates say that if we achieve productivity growth similar to its long run average, the next decade will see the slowest income growth in Australia for half a century by a lot.”
Many procrastinating first home buyers are accepting the advice of seasoned veterans that debt levels were also overwhelming when they brought 20 or 30 years ago, but if you get in early, the effects of wage inflation will soon make it insignificant. Household debt levels as a percentage of household disposable income aside, one has to question if we are about to enter a dangerous new world of wage deflation, and low inflation. These seasoned veterans might have fond memories when high inflation and wage growth eroded their – relative to today – minuscule debts away, but will it continue to play out for our first time buyers today? Worst still, what happens if the bubble bursts?
The other risk of low wage growth is what happens when emergency low interest rates start to rise? Of the first timers left, they are scrambling to get a foot in the door with boarder line serviceability, a 25 to 30 year mortgage, and at 60 year low interest rates with the hope they will have increased earning capacity when rates start to go up. The only positive, with Australia’s crippling household debt, low consumer confidence and poor consumption, it is hard to see rates rising in the foreseeable future. If anything, the official cash rate should resume its descent soon.
» Australian Wages are too high, say Nobel prize winning economist Macquarie Graduate School of Management, 29th May 2014.
» Nobel winner warns Australian wages will fall or jobless rate will rise – The ABC, 30th May 2014.
» Australian wages to fall, says Nobel laureate – The Sydney Morning Herald, 30th May 2014.
» Real wages growth worst in 17 years – The Sydney Morning Herald, 30th May 2014.
» Australian manufacturing priced out – Macrobusiness, 5th May 2014.
» Real wages start to fall – Who crashed the economy?, 19th February 2014.
Why would I want to make things when I can walk the isles at Masters, pretend to do something, and get paid more than a machinist?
Even entertaining the idea of Australia competing with China on wages is absurd.
Welcome to neo-serfdom where you will be expected to work for food and shelter. The corporates will own the housing and land (nobility) and the government (royalty) will take its share in taxes to maintain their lifestyle and power. I can feel a “let them eat cake” moment coming on!
Average income earnings are a distorted lie.The management sector have had very generous salary increases,consistently year to year,in recent decades.This has pushed median numbers up,to make it look good in theory and paper reports.Fair could not be further,from the truth,than it is now.Ask any, construction worker or small business,what their take home pay is.$30k full time.$15k casual(working half year).How can they reduce the wages, of the working poor,when most families are living below the poverty line.RASCALS.This is, the tragedy of our times, when greed and corruption are promoted values and honesty and hard work is ridiculed.
And this is why the politicians and bureaucrats are worried. Lower consumption means lower tax receipts.
The amount of spending that has gone into and is still going into housing is draining the amount of spending in other parts of the economy. Watch as restaurants, resorts, clothing retailers and other small business reliant on discretionary spending start closing en masse in the next few years.
By going into debt you’re bringing the spending that you may have done in the future into the present. Therefore if your income remains fairly constant you will spend less in the future than you may otherwise have. This may not be a problem for small debts but it is if most people earning an income have large debts.
@56
$30k p/a? Are you kidding? It’s not the 80’s anymore…
@David C
Good comment, and I think what you have mentioned with regards to small businesses is already happening. After the release of the 2014 budget, I was reading many of the readers comments made in the Sydney Morning Herald, and many of them were small business owners complaining how their sales have plummeted and that they have had to lay off staff.
The 2014 budget has effectively killed any confidence in the Australian economy, and Australians have reacted accordingly by closing their wallets.
Australia’s economy is doomed, as manufacturing is all but dead, and we all have is what we dig out of the ground (and even that is declining with mining boom over), and selling overpriced houses to each other, fueled by absurd levels of debt.
Like all others who state that wages for workers must fall Mirrlees only targets factory, farm workers, labourers, shop assistants and non management staff etc as having wages too high.
He does mention or touch on senior management, politicians and other blood suckers (banking, finance etc).
Once he cuts his own salary by 85% (real wage including bonuses and stock etc, not tax adjusted) then I will accept what he says.
Till then I need what I get to pay my rates etc.
But I would work for chinese wages if my land & water rates were $5 a year and other costs were the around the same.
But that is not going to happen is it?
@Ralph, From what I understand, Mirrlees is calling for cuts from the board room to the factory floor.
You are right about wages being relative to cost of living. I would be happy with wages half of what I get today, if my living costs were half. This would also mean Australia could also be competitive again in the international market place, underpinning jobs and opportunity.
@Patrick Wake up.Gross income is not what you take home.Carpentry contracting is my work,if it’s negotiated.The rates are nearly half of what they were in the eighties.Not joking son!
@56andoverit & Patrick
Median income is a FAR better indicator. In SA I believe it’s barely cracked into the low $40k p.a.
As for small business owners earning less than employees. This is well common, in good times and bad. At the present time I would believe most small business owners are earning far less than staff. With no super, no workcover, sick leave or annual leave. And 60+ hours a week.
Everything is a game of balance and equilibrium. As China comes off the boil and they stop STOCKPILING resources (that’s right, the demand they have been displaying has built up huge stockpiles that mean demand for resources has even further to fall) commodity based economies like Canada, Australia will see their dollar implode. This alone will have the effect of wage drops, as the cost of imports skyrocket.
The future of countries like Australia is not very promising at all. In the name of prosperity we have completely decimated our future. Most of the public were stupid and bought the lie. The lie that as employees you can rack up huge debts in consumerism and unproductive investments (looking at you housing) and expect to come out the other side with early retirement and an enviable lifestyle.
Unfortunately, the schools don’t teach the truth: In our fiat, fractional reserve finance system, wealth is accumulated by those in the finance/political sector, and by the few entrepreneurs who produce genuine innovation.
The ‘average’ employee on $60k p.a. DOES NOT have the right to expect that their life will end well. It’s a myth….Maybe mythbusters should do a finance episode….
@56
With respect, i dont work in construction. Just a small contractor pushing shit uphill. A close friend works for a firm in ACT. Gov/civil contracts. This guy earns $39 p/h- $55 during overtime..$82.50 on weekends gross. Employed as a leading HAND! Labour hand. Has done for years now and is geared to the eyeballs. Exactly whom we discuss in this forum…..
At times I have envied him, but Ive always known it wont last.
Our wages put simply, are over the top….
I had a part time job in 2004 at a govt. dinosaur laboratory, and research facility when a memo came in from some escaped mental patient called John Howard, that the lab was to transform itself into a profit making exercise, as it was to be receiving less govt funding in the future.
The distinguished, mature aged professors discussed this at length, in the rather quaint tea room, and apart from the obvious conclusion that Howard had rocks in his head, they were quite certain his request was impossible.
The primary reason for this is that the research is valid for long term extinction event studies, and has little immediate value. Ideas like getting paid customers on dinosaur field trips were discussed, but not considered ethical because such a business model defies Adam Smiths theories, that is , there is no value exchange for the customers money. Bit like an expensive holiday, or one of Howard’s regular expensive skiing holidays:
He takes our money and blows it; no value exchange, money never seen again.
But evidently Howard asked this of all departments,
So what we have is this : The crown owns all the minerals.
Minerals are exported .
The money comes in, goes into the banks,
They use it write pixie land loans ( those mortgage brokers must smoke some good stuff )
Wages stay firm
Holden closes.
Unemployment in Melbourne, and then Sydney skyrockets,
China implodes
Aussie real estate implodes.
Buyers back trade their way on to safe ground
Until it all bottoms out.
Dollar collapses.
Foreign investment pulls out, but where do they put their money ?
BHPBilliton closes all Aussie operations, dives further into US Oil and Gas
Fuel hits $4 a litre, say.
Economy evaporates like a soap bubble.
Things are really, really quiet.
Backyard fruit and vege gardens become popular
Parents can’t afford school fees,
So home schooling grows.
Handyman/mending services spring up ( remember Clint Eastwood in Gran Torino ? )
Legal firms go broke, Actually I know one in mooloolaba that is toast.
Roads are much quieter.
Fed govt continues exporting lumber / minerals oil and gas and coal
BUT,
The government have set up the entire system of trade as a revenue system for themselves to lwaste.
So they will try everything to prevent this, but they will fail, because Abbott is a turnip.
One estimate I read recently said that Aus real estate is trading at ten times what it actually costs to build. ( when you count the multiplayer of inflation on everything )
So let’s say a house for $500,000 actually should sell for $50,000,
Then an investor would only need a 10th of the rent to cover the repayments
Imagine paying $30 a week for a house ? Of course there would be no money to pay the rent, as electricity and petrol, oh, and what do you reckon you’ll be paying for beef when diesel hits $4 a litre ? Sure you could have a chook run, oh and the price of fish will climb too.
Yeah, we just bought 1300 acres of working beef cattle farm for $600,000, 1 1/2 hours to fishing beach . Suggest you get yerselves some real cheap land with a shed, near a dairy or beef cattle,
Or wait for the crash and claim squatters rights.
And teach yer spots how to fix an old ute.And ride a horse.
Signed a petroleum engineering student and his Doctor brother.
All about connections and being connected to THE PARTY.Common knowledge;Leading Hands are stooges informants and spies for management.They get their 30 Coins of Silver,as a bonus,for serving their masters.Unfortunately,in the construction industry,for trade contractors there is no hourly rate.The rate is a price,for each item of specialization,that management sets to workers.For example,to fit a HC door to a steel jamb/frame with latch and handles(lock) is $30.(inhaling dust particles that cause cancer is part of the service).The steel jambs/frames are usually installed by exploited contractors supervised by leading hands.Because it is done,fast and cheap,the steel jambs are always not ideal.The heads are not level and the sides are not plum.The door fitter has to scribe the door to the opening size.if the door does not fit properly(3mm clearance around 3 sides),he does not get payed and is told to leave.Going flat out pedal to the metal.How many doors do you think you can swing in one day.Then,the following day,how many latches and handles or locks can you house and fit in.The mid to late eighties this same job used to pay $50 for HC door and lock on steel jamb.Am sure all other trade contractors are in similar positions.Don’t forget you may be payed in 2 weeks,3 months or never.(doesn’t help to cover tool maintenance).Consruction development is a de-regulated industry.Things can only get worse.Nearly 1.8 million workers on 457 visas.Told ,in their native countries,that they can make $50/hr in OZ.The lucky ones get $20/hr the rest less or nothing.
Just so you guys don’t get your hopes up trying to compare Ireland’s bubble with Australia’s.
1. Even though mining capex is falling off a cliff, Australia still has a solid mineral export market. Ireland is a small island that has sheep and beer.
2. While there are a lot of immigrants from eastern block countries moving to Ireland I doubt there is the giant waves of cashed up asian migrants wanting to buy citizenship like in Sydney and Melbourne.
I’m sorry but unless there is a global economic collapse or changes are made to Negative Gearing and foreign investment rules, there won’t be a proper crash here in Australia. A slump, not a crash is my prediction.
Negative Gearing and a toothless FIRB is very powerful combination.
The Australian mindset is amazing!
Any young Australian buying in now when lower wages and no wage growth are going to come into play is a sucker.
When the economy tanks and people leave the country there will be a huge surplus of property and housing will crash.
The penny might eventually drop that owning a house (renting from the bank) with negative equity and no disposable income is a nightmare of epic proportions.
On a side note we are planning on moving to a much better area in Perth which we can now afford to rent in and the schools are better for the kids.
We still have plenty of disposable income but are just stashing the cash.
I can just see the first day at school and the question- “have you just bought in the area?” To our reply “no we are renting”
I will also love to gauge their mindset over the next few years as property values and wages fall.
I believe wage growth has it roots in the rising cost of land and houses. No media based article dares to state our wages are low in comparison to the cost of housing and yet the topic of high wages is always in the limelight. Any article that criticizes our wages are government and private business interests. House and land prices are very high in Asia also and yet the average wage for the worker there, especially in China is still paltry and at best pathetic. Asia is the best example to prove wages growth(if any) has no correlation with being the culprit of economic failure. I do not believe the correlation and at best the argument is fabricated. We should look at the legal corruption of all governments and their willingness to prop up a housing market by vague tax laws, housing grants, loopholes etc. etc. to benefit a minority at the expense of the majority of us. However that does not excuse us-the voter, from being blameless also. Our continuing support for politicians has set the foundation for our continuing economic demise. What we have sowed(the voter) so shall we reap.
I am amused at the many comments here suggesting, that when the proverbial shit hits the fan, people will simply up sticks and leave. Let me ask – where will these emigres go? Europe? The US? Asia? South America? India? South Africa? Do you see where I’m going with this?
While I cannot disagree with the general sentiment that property prices are way too high, borrowing way too high and the rest of it, Australia remains, whether we like it or not, an under-populated country with an awesome climate, relatively low crime, little involvement in war, and a great quality of life.
Yes, the politicians are all scumbags, but where in the world are they not? So please folks, it’s all very well bemoaning the system, but let’s at least understand that most other countries in the world are a damn sight worse!
Net migration from New Zealand was 40k annually around 2 years ago,last month it was 200 down from 400.
Not all temporary visa holders are entitled to benefits here is OZ, and being an expensive place to live some will choose to head home and many will be forced to head home if the economy slows more.
Do you see where I am going with this?
http://www.theaustralian.com.au/travel/news/new-zealanders-taking-flight-to-australia-to-live/story-e6frg8ro-1226618562013
We have sown the seeds of our own destruction via the creation of a ‘rentier’ economy and a gigantic property bubble whose inflationary influence flows through to commercial rents (high retail prices), higher wages to service greater levels of debt, etc. At come point this will all come to a crashing end as it is unsustainable.
Another ignorant economist that bases their understanding of the world via finance and simplistic and pointless models. Australia cannot compete with Asia via low wages and it would be national suicide to do so. We need to create an ‘innovation economy’. Trouble is the lucky country is run by second rate people that are incapable of making such and transistion.
@Average bloke
I’m Irish.If you think all there is to Ireland is sheep and beer then you know nothing about Ireland.
Your remark is ignorant at best and racist at worst and has no place on here.
Average Bloke,
OZ government cannot sell citizenship to rich Chins. China’s population allows even a tiny fraction of its rich migrants could sufficiently vote OZ polcies out. There are altogether a few hundred rich chins so far came to OZ.
US$400b deal between China and Russia means something to OZ. Palmer’s law suit also means something. There are more…
Do not think China will be the life-straw for OZ property bubble either.
Theo,
Thanks for the interesting point. While I think there are such media articles over wage and RE cost. Recently GM, Mitushubishi’s withdrawals were comments as the result of over-costly land and wages required to sustain their employees, which could be another way to express the same idea…
That’s right…Ireland has tourisim too…”More than just sheep and beer, so where the bloody hell are ya” And maybe nothing worse than an Australian of convict dissent calling somebody Irish. Lol..racist.
@Millimouse
“Palmer’s law suit also means something.”
You mean the Clive Palmer the next Prime minister of Australia? 😉
Guys guys calm down. My grandmother was Irish!
Sorry but I resent being called racist because I said Ireland has sheep and beer. I meant it in a nonsensical way.
I know Ireland has a big tourism industry as well. But a lot of its other industries has faded out. The Celtic Tiger industries such as the IT boom are in decline are they not?
My point was that a small island with approx 4 million people in Europe cannot be compared to a massive resource rich island-continent a stones throw from Asia. I still stand by this point.
What this dynamite (Nobel) prize winning economist is probably trying to say is for government and unions to stay out of wage fixing. The idea is to let market forces work so that massive unemployment forces wages down. His concept that the boardrooms will also take a cut won’t happen as long as the vested interests of corporate lobby groups and government stay in place. It is not a coincidence that he is talking to members of a large bank that owns global assets.
Yoda has no master!
Yoda sees people willing to work for less. Home office number explode and less traditional wage type employment going forward.
Servicing the big mortgages will not continue. 2015 and 2016 should see consistent declines in house prices to reflect the reduced earnings and serviceability of debt.
Enjoy. Wage deflation is a product of globalisation!!. So enjoy your cheap crap from Bunnings etc.
Regardless of what the leading interlectuals say of Australia, the Australian economy isnt based on logic or reason. We can trace all this rubbish back to the ditching of the gold standard during WW1 so money could be printed. Economics became little more than opinion. Why anyone values the Chinese Yen in particular baffles me. Its worth less than the paper its printed on. You can at least wipe your arse with the paper.
I’m beginning to think the economy won’t crash at all but rather those to believe in the rubbish will be deemed wealthy and those that dont will be marginalised. Capitalism is the largest religion of the 21st Century. You have to believe in their imaginary friends or you will be deemed a immoral or a terrorist.
News.com.au, the most biased news in Australia, just realised a new article about property prices cooling. Melbourne seems worst hit so far though Sydney must be in for a world of hurt.
Actually Ireland can’t get enough IT people at the moment.
Demand for professionals is climbing and a new boom is on the horizon.
Ireland also has a huge Pharmaceutical sector that powers the economy and is crying out for skilled professionals to return ( I work in this sector).
Rory,
Thanks again for your valuable contribution here, really appreciated it.
All the best
Lol reduce wages… But the bank said my wages will go up and make my mortgage repayments easier!!! Why would they lie to me!
I’m so so so fkn glad I didn’t buy in the last few years and shifted all my assets overseas. I’ve quadrupled my assets from simply not investing in Australia and following each countries ‘stimulus’ packages 😉
Did you see 95% of new finance in Australia goes to support housing…. HAHaHahaha
You guys are screwed. You’ll never come back from that. You can either crash and take it like a man or go into a horrible depressing stagnation where the only jobs are minimum wage and everyone with half a brain ups and leaves.
Back in London, when my wages were heading downward, I thought it would pass – you know, the recession and all that. But, when in 2010, I earned 50% less than I did in 2005, I decided to get out of the UK and move to Australia. My earnings are now back to where they were in 2005 – and more. However, as sure as night follows day, the same thing that happened in Britain WILL happen here in Australia.
The question remains – then what? There are NO MORE COUNTRIES to ‘follow the money’ to. Upping sticks and leaving just doesn’t make sense to me. Best thing (for me at any rate) is to get all my ducks in a row, save like my life depended on it, borrow NOTHING, get rid of all the accumulated crap, and prepare for lower wages and higher prices by being as self-sufficient and self-reliant as possible.
The sun will continue shining and the Pacific will continue to crash against the shore of some the most stunning coastline in the world. Leave? Not in your nelly mate!
Someone above said capitalism is a religion – damn right it is. And it’s been totally debunked. Only the foolish faithful will keep pursuing this heinous idea of neo-economic capitalism by moving to polluted cities like Shangahai or Mumbai or Sao Paolo. What for? Money? Things? Fancy apartments? Fast cars? Bollocks to all that!
I love Australia, and with or without inept government interference, I intend to make the most of this beautiful country.
Hi all,
We no longer have capitalism we have crony capitalism or fascism
prepper
Jack,
Quadruplicated? how?
@Rupert, it’s very true what you say about there being nowhere to follow the money to. The banking cartels appear to have taken the whole planet into their grasp via debt (private or public, the end result is the same). Don’t we humans owe the universe 40 trillion or so?
what about this?
real-estate will link with Chinese website 30mil hits
http://www.rebonline.com.au/breaking-news/7715-chinese-listing-portals-increase-ties-with-australia
I have a friend in WA whose tiling business consists of 50% Chinese Students who are here on student visas and cannot speak English.
Of the now many more than 1.75 million temporary visa holders I can pretty much guarantee most are either not entitled to unemployment benefits, are recent 457 visa holders, working holiday makers, students, or are here working illegally.
Throw in the fact our new government wants to restrict under 30s to no dole for 6 months in every year or having to work for it to me indicates they are preparing for higher unemployment.
The new study out that a large amount of our university students will not walk into a job will make overseas students and our own kids not likely to be flooding the Uni’s. ( and don’t expect too much help from the wealth effect either)
Overseas students are already choosing elsewhere as Australia is too expensive and the economy is rolling over.
Of course this is contingent on the SHTF in Australia, only time will tell if people choose to stay or go.
I could choose to head back to Canada where I was for the GFC and chose to move from one side of the country to the other during the depths of it.
You are right Rupert that you can find work if you take what is on offer, and you live within your means as I had a job in 2 weeks after moving.
I will however, be quite content back here in OZ like you Rupert.
@ Ben
I hope the Chinese are not to expecting savvy Aussie investors to prop up their own housing bubble. LOL!
So true!! Very sad
@ Steve
Can the Chinese not borrow money from Australian banks to buy Oz property? I read somewhere there was a wespac branch setup in china.
Any idea how this works?
@rupert Its the lucky country with ordinary people – since I came here all people tell you about is how good the weather etc is, but the people are really caught behind a glass wall..too indebted to be a real part of it! All they forever do is tell you about it while in reality 30 yo adults are living with their parents..too out of pocket to buy someone dinner. I find this a paradise inhabited by social inept indept…
@jacks +1 lifestyle elsewhere with clean beaches and sunshine already paid off with the strong $ mined from the aussie economy:)
@ Ben
Sorry Ben I am the wrong person to answer that question, I am sure there are many here that could give you a good explanation of that question.
I do remember ANZ recently making moves in to Asia recently and I am sure our four pillars will do anything in their powers to sell this place out to keep the balls in the air.
The reason gen Y will leave is EXACTLY the same reason Ireland Spain USA (certain states and cities) all up and left. Australia has a problem becuase it’s Australia wide with extreme 10x wages house prices. Here’s the example you’ll understand if you’re Australia
Mining Towns.
Imagine a mining town. When the coal runs out.
Tell me, who are the people first to get the sack. The young.
Once you sack them where do they stay? With their parents.
Once they spend a couple of years doing nothing they eventually decide to leave to the ‘city’ which really means they leave to find stimulation. It’s human nature.
Tell me, does the zero crime rate, perfect weather, fresh air and cheap food keep them there? No. You can scream all you like about the ‘quality’ of life in Australia but you also have to ask… Who’s ‘Quality’ are you talking about…
The only people who stay in dying mining towns are the Baby boomers and gen x’ers who service the baby boomers.
Now apply that to every city in Australia that that’s what you have. A population with a shrinking under 35 demographic becuase they know there’s nothing here for them to achieve, for them to own, for them to build, for them to defend, for them to live.
They have no jobs. They can’t afford a house. They can’t support a family. (All evidenced by the fact gen y doesn’t own or have kids till into their 30’s instead of early 20’s and some areas with 20% youth unemployment…)
There’s NOTHING left here for them. Baby boomers won’t let them build their own futures becuase they refuse to let them develop the land. So as a result they will up and leave to countries that aren’t bogged down by baby boomer and gen x slavery requests for them to sign a 30 year dual income loan contract with FALLING REAL WAGES and the ONLY way for interest rates to go being UP.
Yer. gen Y has plenty to stay for but it’s their human nature that will make them leave. You can already see it in the immigration stats and vacancy rates. It’s imploding as we speak and will be a total collapse in about 12 months.
Watched Margin Call last night. No buys-no swaps. Sell, sell, sell. Interesting how one trillion dollars can be worth a bag of excrement.
Now I convert that to Australian RE. Wow! When the SHTF it will be more than half over before 100,000’s of households discover they’re screwed. All reliant on jobs. We go to work to acquire cheap chinese crap and poor cafe food and electronic crap for our kids because we are scared they think we don’t love them.
These “kids” are already fucked for work, skills and a future home because of our greed.
Employment is about to crash and nobody has a bloody clue what to do. Jesus F Christ! Am I about to see half the country all rush for the door at once with a 5br house and 2-3 “investments” in hand? ….all looking to sell NOW!
I found myself in an usually uncomfortable situation I wasn’t prepared for.
We’re looking at a new car: The old one 14 years old, 250,000km, very reliable. We have the money and have been talking about it for years:
Any way so we’re at a big dealer, “1% finance on certain models” type of brand. Wife says “Are we better paying cash or getting 1% finance”. I say “Cash….” So the ‘salesman’ (these guys know their jobs will be gone in 5 years when cars are purchased as a commodity off the net right?) says “I’ll introduce you to our finance guy”.
Well, at first WE stumped him LOL! He needed a few basic details, number of years in current job, length of time renting or length of home mortgage etc..
He obviously doesn’t deal with many people who have cash sitting in bank accounts with ready access to it.. You could see him trying to work out why we SHOULD use his finance, rather than pay cash (he is a salesman too after all- and the highest paid in the building)
Then the shocker of a reply: Never, ever in my wildest dreams did I expect a car dealership to form part of the spruiking machine:
“If you keep your money in the bank and use our finance, you can use your money for a house deposit”
WTF! I didn’t see a financial adviser license anywhere lol.
Me to wife “told you cash was better”. Didn’t have the time, patience or humanity to tell this guy what I thought of his idea.
We truly are reaching a minski moment, where everything, absolutely everything, is paid for by the consumer using debt. It is horrifying. All I see when I’m shopping, reading papers, getting quotes are rediculous prices from everyone using Other Peoples Money.
When SHTF, asset prices are going to plummet. For those with solid assets (true cash, precious metals, asset backed stocks, property that is backed by importance eg. ports, railways) Australia will be your oyster.
Trouble is, we will be invaded by foreign cash, the likes we have never seen, rich investors can see through the clutter and purchase Australia for pennies on the pound.
And the Australian people will let it happen, we are so used to the line that we need foreign capital and investment, that we will believe it’s good for us:
A nation of broke, indebted and unemployed people, with a decaying welfare system, a broke government with no idea of entreprenuerialism. And foreign owners of utilities and commodities.
If the Aussie public think they are doing it tough now: They have a hell of a lesson coming.
@ Patrick
I refer back to my point that we are headed to neo-serfdom. As is happening now in the US, mortgagee owned houses are being purchased from the banks by hedge funds for cents on the dollar. This global “pump ‘n dump” scheme pushed by banks and governments makes the “Wolf of Wall St” look like a novice.
I heard on the radio that the NSW government is about to launch a new first home owners grant. This is all sounds good in theory, as the NSW government wants to boost the building industry.
One major problem, people need secure, well paid jobs to service the massive mortgages in order to pay those houses off. Question is, where are the jobs?, and where is the job security? Today, I read that Australia Post will axe 900 jobs, plus they have indicated that mail will only be delivered 3 days a week, instead of the normal 5 (Australia Post is losing money big time).
Lets cut the BS folks, the Aussie economy is going pear shaped fast, and no amount of Government spin can hide that. I have to shake my head in disbelief whenever Australia’s “official” unemployment rate is announced at under 6%, I’d say the REAL figure is close to 13%, and probably 25% for young Australians.
Master Yoda, you are right about Australian jobs and their rapid decline. Auspost is 900, Qantas announced on Friday 223 pilots will be gone by end June. Thursday, Melbourne University announced its plan to axe 540 professional staff and Nexan announced the closure of one of two Melbourne cable plants that will see 90 jobs gone at the end of the year.
We are now losing Thousands of jobs a week.
@Matty
I very recently went to look at a car. Told them I had ‘CASH’ and wanted to use cash. This didn’t stop him from sitting me down and then bringing in a finance guy trying to convince me to get a loan instead. In the end I walked because I’m not a fkn retard but they pushed HARD they even had a pre-filled in application for the car and disguised it as the purchase documents to get all my info! It was CRAZY and they also said I should use the cash to maybe buy a unit in the city or something!!! I Was like WTF.
That was Melville Toyota in WA.
It was INSANE they shut the door and said to me “SOMETIMES YOU JUST HAVE TO DO IT. DO IT. GET IT DONE.” and were yelling at me to sign the documents. Literally yelling. I left. What idiots. Soon we’ll be able to buy cars online like iphones and toasters. Car dealers are going the way of blockbuster video.
@Master Yoda
Oh yer my… 95% of all finance in housing? lets give it a boost to get more people into housing haha… Lets not move our economy to a balances 30% housing like economies that don’t struggle haha. We currently have I think its 60-70% in banking and property and 20-30% in mining… Our economy is GREAT!…
There is a transition coming where by people need to realise that housing needs to be thought of as a car, or hammer. Its a tool to help us achieve human endeavors. The land itself needs to be forced to be set to cost zero. The services available to the land need to be taxed and indexed yearly if provided by the government. And collected yearly. The government is merely a management system for a population. Not a 50% tax scam of self interest. They need to put engineers, city planners and social engineers to work and not small local councils who go ‘hey, come in, build a train station for us, we’ll help by allowing 10% public housing…” then when push comes to shove and the projects started they put the public housing at the edge of their suburb 10km from the train station and then build a water course or multilane road to split the suburb and prevent the poor and most populous people from the service then refuse to rezone around the train station so they can enjoy their 1000m2 homes 1min from the station and shops.
Australia has so god dam many corrupt little councils its no wonder the place is just an urban sprawl of self interest. So many other countries have way way way better planning because they know you don’t let a retiree or a house wife or a local business man or a journo sit on and make decisions for the town council and planning.
That’s the way its going to stay for decades to come. Australia is 50 years behind the rest and just keeps on slipping away. We’ll never reach the point we need to until our population becomes self sustaining with cars, tech, medicine, affordable housing. Which will probably occur at the 200-300 million person mark.
And they need to stop with this climate change crap. Its turned into a cult. Morons and brainwashed youth who don’t know how to solve problems or with the faintest idea of how to work and engineer a solution. For them its just about providing them with a distraction and something to rebel against. You think anyone wants to live in a world where the average temperature is 50 degrees? Or where you cant see the sunrise due to the smog? So why do they feel the need to make an issue about something that everyone agrees on lol. Because they are stupid.
Someone mentioned youth population is at 25%. I can confirm that. I work with students and job placement and contracting. Participation is under 60% and unemployment at 25%. Only about 1/3 people have jobs under 25. The rest just go to environment rallies or stay at home all day. Its terrible because they’ve been told they are useless and have no potential and cant go out and experience the world all because the baby boomers have told them they are materialistic and shallow when telling them that has actually made them into introverted idiots who cant think for themselves.
@50/51 Yeah, but think of all the school chaplains $250m can buy you! Priestly postie pilots anyone?
The media can pretty much twist and / or straight out make headlines about property rising in any particular state. Funny how Fairfax Media also own the real estate website Domain and constantly try to trip Clive Palmer for vested interest.
http://fairfaxmedia.com.au/our-assets/online.dot
http://news.domain.com.au/domain/real-estate-news/strong-results-despite-long-weekend-20140609-zs1ef.html
@Ben – Dr Andrew Wilson massaging auction data – never!
His work was exposed last year by the ABC and AFR:
Lies, damned lies and auction clearance rates
Roger Montgomery in the studio with Ticky
Rba doesn’t trust Abs stats? Or were the numbers so small the graphic designer just needed an excuse coz they couldn’t figure out how to represent it on the same graph?
http://m.smh.com.au/business/comment-and-analysis/first-home-buyer-statistics-not-adding-up-20140609-39sam.html
Looks like our government has now empowered itself to take our money straight from the banks:
http://www.news.com.au/finance/business/government-grabs-360-million-from-idle-household-bank-accounts/story-fnkjidjt-1226949101984
It’s supposed to be for our benefit.
@ Chockolate: Post 57
Yep: If I’ve said it once, I’ve said it a thousand times: The former Federal Labor government passed a Cyprus style bail-in into law: As did the G20 from what I believe.
Why all the hoo haa, about a new tax, health, pension and university cuts when the Government can LEGALLY take your bank account?
There is some nasty s#&t brewing, anyone with half an idea can feel it walking through their local shopping centre, or driving around the ‘burbs.
Problem is, “the many” are too busy watching Port Adelaide in awe or wasting their time and effort on other such entertainment.
The smart are silently moving into hard assets.
Warren Buffet is famed for saying “It’s only when the tide goes out that you can see who’s swimming naked”. Well I’m not so sure about that, cos there’s an awful lot of clothing on the beach.
As someone who owns a business in one of the sectors where people are hit with unexpected expenses, I can tell you that people have never been broker. The number of people who cant pay their own bills is amazing: Baby boomers to the rescue! “Mum will have to pay for this, Dad will pick up the bill for this etc”…..Except Mum and Dad’s money is tied up in leveraged housing and properties, with any free cash paying off caravans and 4WD’s.
There is to be some very cheap “lifestyles” up for fire sale prices when this all corrects.
I’m sure we’re all well aware: Consider yourselves warned!
Yes Matty
+1
prepper
Both the government and media are taking us the people, for mugs.
I say this because today on the radio, it was announced by the ABS, that Australia’s “official” unemployment rate is still at 5.8%. Who are these clowns (ie. the government and media), trying to kid?
Virtually every week some company is either going bust, moving offshore to some low cost country, or in the case of foreign multinationals eg.Ford,Holden and Toyota, they are pulling up stumps because our wages are too high (thanks to the property bubble), and for the fact they are losing money (even with government assistance).
A few days ago, whilst I was walking around Leichhardt here in Sydney, I was shocked by the abnormally high number of “for lease” signs on many of the now empty shops that are closing down because the economy is going pare shaped, and people are closing their wallets. If unemployment is supposedly 5.8% (total BS as the government fiddle the figures), then why are so many small businesses are going under?
Judging from all the people’s complaints and arguments here the statements, ‘DONT BUY NOW!!’ AND ‘DONT VOTE FOR THEM NOW'(politicians), are more relevant than ever-SPREAD THE WORD!!
China has announced new measures aimed at bolstering its economic growth.
These include plans to build railways, roads and airports along the Yangtze River – which connects China’s less developed inland provinces to Shanghai.
Meanwhile, China’s central bank said it will encourage banks to lend more to exporters to boost shipments.
The moves, the latest in a series of steps taken in recent weeks, come amid concerns over a slowdown in China’s economy – the world’s second-largest.
Unless China slows down dramatically I can’t see things changing in the short term.
There is a very good reason for governements not to support the car industry at the moment. There is a glut of unsold stock. Isn’t this what they call a misallocation of resources in economics lingo.
Most of the measures the Chinese government has announced will help only in infrastructure, after neglecting it for so long and the selling of its goods but it will not interfere any more in subsidizing the manufacturing and Bank industry, which is the reason China is in so much debt today. It will improve the lives of its people. China’s change in priorities will only encourage real and long term growth instead of debt driven growth which both China and Australia have gone through up to now. However, unlike China, Australia has almost nothing to show for all that massive government and public debt. Our manufacturing sector which is the best and only indicator of true economic growth is dying, real growth in spending on infrastructure is falling behind, real wages growth is falling etc. etc. Only house and land prices are going up. The government(both parties) and our(the voter) legacy for all this debt is a massively overpriced housing market. We have mortgaged our future and especially the future of our children on the gamble of investing in the housing sector equivalent of the stockmarket and what is incomprehensible is that most, not all, of us are OK with that. Just think about this for a moment.
@THEO I think bout this every single day. I think to myself if only my family and gf didn’t live here i would leave this shit hole.
http://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=Australia&country2=Germany&city1=Sydney&city2=Frankfurt
Local Purchasing Power in Frankfurt is 43.06% higher than in Sydney
and believe me the prices and salaries in germany and australia are similar to the ones presented at that page (I know this as I had an opportunity to work in both coutries)
most likely your economy has already deteliorated more than most of you either anticipated or expected