It's been quite a while I will admit but I have posted about this previously.
Australia simply spends more as a nation than it earns. Whilst we continue to service the debt, there is seemingly no problem, but like any debt, it eventually has to be paid back with interest.
I believe that the vast majority of the non-government debt is held by the banks. The banks have been selling bonds for a long time, to support their operations here.
I also believe that the vast majority of the bank debt has been used to fund real estate borrowings.
I think it makes Australia incredibly vulnerable. Should we experience a major downturn (we haven't had one for a long time and there are many younger people who haven't seen one yet) then property prices, which are so expensive by any metric you want to use that it is very scary, could come crashing down which will mean the banks will come under severe pressure because of all the debt they are holding.
Guess what will happen then? The good old taxpayers will have to foot the bill. This will result in a massive increase in the size of the government debt.
Which will mean less money available for government services, most likely higher taxation, and bond prices will rise to attract more money.
It's bloody scary and I don't think anyone is really willing to talk about it, because most punters don't understand, don't care, and the political cycle is way too short for anyone to do anything about it.
