sobering as usual :O) still not counting on government pension as part of plan... home ? still only insurance.. not a true
asset.. meanwhile....
From: russet 1/3/2011 8:45:52 PM
of 1406
Australians sinking under debt burden Nick Gardner From: The Sunday Telegraph January 02, 2011 12:00AM
dailytelegraph.com.au
AUSTRALIA is heading for an economic crunch as family finances collapse under the burden of record debts, rising interest rates and utility bills.
With banks warning they will be forced to raise mortgage rates by 0.50 per cent in 2011 and Sydney rents forecast to rise by between $160 and $190 a month, according to analysts Residex, householders look set to suffer.
Repossessions and tenant evictions are expected to rise sharply. "It's going to be tough" said Shane Oliver, chief economist at AMP Capital.
"Families face many rising costs and while most people have slowed their borrowing, our debt is still growing and that's a big problem."
When the global financial crisis hit in 2008, Australians started paying down credit cards and loans, but quickly began piling on the credit again when it became clear we had avoided the worst of the crisis.
According to the Reserve Bank, Australians have added almost $220 billion to household debt levels since the beginning of 2008, taking our borrowings to a record $1.3 trillion.
Despite more cautious spending in recent months, household debt is still up by 5.8 per cent on a year ago and a recent survey by Westpac found only about 20 per cent of people thought paying off debts was the best use of their money. Most households in the US, UK and much of Europe are still busily paying down their borrowings, particularly unsecured debts such as personal loans and credit cards.
"Unlike the rest of the world, Australia has slipped back into its old habits," said Steve Keen, professor of economics at the University of Western Sydney.
"We're spending ourselves right back into trouble. With so much extra debt to service, we don't need interest rates to reach anything like the 9.6 per cent they hit in 2008.
"We may find repossessions spiking much more quickly than they did two years ago."
In the first nine months of 2008, before the RBA began slashing interest rates, 1300 families lost their homes in NSW.
Mr Oliver has estimated that debt will become unmanageable for many households when mortgage rates rise from 7.80 per cent to about 8.50 per cent.
"At that stage homeowners could hit a wall," he said.
Economists are forecasting three 0.25 per cent rate hikes for 2011, taking the typical mortgage rate to 8.55 per cent.
Craig James, chief economist at CommSec, said households may have to pare back budgets. "People can cut back on pay TV, holidays, mobile phones and all types of other discretionary spending," he said. |
