housing debt, page-6

So our population is going to increase with less investments occurring in businesses. That can only mean rising unemployment, which will be compounded by rising interest rates. These emergency rates will never be seen again, and once commoditiy price rises scares the pants off our leaders expect a sharp rise in rates again.

If the economy is looking to recover as fast as it has been of late then the current rates will be history. Anyone taking a loan based on current rates will need to get a good look at their financial situation to ensure they're capable of surviving at 10% plus rates! As it is now a loan at 5% will see the monthly repayments increase by 20% once it goes to 6%. Maybe that won't cause home owners sell out but it will certainly put a slow down on the over heated market. If we go to 7%, along with the removal of the FHBGs then the first home buyers will be effectively shut out of the market.

To back that up the current stimulus tricks has brought into the market young individuals who would of otherwise waited on the sidelines to save for a home deposit. As they represent around 25% of current home buyers their absence will leave a void in the market. It's hard to see the truth when blinded by the love of money and wealth, but the wealth of Australians is challenged by the existence of China's excessively cheap currency. While we trade with them and continue to buy their products over our products our trade deficit will continue to be a burden on our economy. Their low working conditions and benefits will pull us down to their wealth levels unless there's a major shift from the current dynamics. But that will never happen until the obvious will trigger intervention.

Will our mining boom be adequate to keep our economic cycle going while we buy cheap imported goods? I only hope the boom keeps improving. If the boom slows down and China's cheap goods suddenly become expensive then we could be looking at a very difficult situation indeed. Are we ready for such an occurrence? Or are we so focused on one path only that it's inconceivable that my scenario is possible? I say we should use this recovery as means of establishing our independence, reducing individual debt, increasing local production of goods and services, ensuring the majority of Australians are productive (and that includes the indigenous community as well as single parents) rather than importing labour. That will ensure we can avoid any future bubbles as well as being more prepared for any future global shocks.

What if a war breaks out? What if China gets so annoyed it's unable to take over BHP? What if it decides to stop exporting cheap goods to our shores? We are too fixated on one path only, and we are in bed with a body that is complete stranger in which we know very little about and that is totally unpredictable. I know a lot of you will be smirking in thinking I must be some kind of fruit cake. But the world has had it's share of comic forecasts that turned out to be true.