Australians going broke in record numbers

Australians are going broke at a record rate with about 3000 people hitting the skids each month as they are swamped by growing debt.

According to the latest insolvency statistics more than 9000 Australians went broke during the September quarter, as total insolvencies jumped 12.5 per cent, compared with a year ago.

The statistics are from the latest report by the government insolvency agency, Insolvency & Trustee Services Australia and come ahead of the expected fallout from the heavy share market slump during October.

“The latest statistics show that the total number of bankruptcies is at the highest level ever,” Hall Chadwick bankruptcy trustee Paul Leroy said.

“All the tell-tale signs are there – high levels of debt, cost of living and the increasing concern with the share market.

“Looking right across the country the economy is balanced on a knife-edge and very vulnerable to any number of destabilising shocks that could spell truly significant hardship for many,” Mr Leroy said.

“The recent decrease in interest rates is an attempt to avert a severe downturn in the economy and bears all the warning signs.

“This financial year we’re expecting an even higher number of bankruptcies. It may all hold together if the economy and high employment levels can be maintained but the likelihood of a downturn in the economy is becoming increasingly apparent,” he said.

“More people are more critically dependent upon next week’s pay cheque than at any time for the last 10 to 20 years,” Mr Leroy said.

There are also some real hot spots around the country where bankruptcies are running at record high numbers.

The ACT had the dubious honour of having the biggest jump in insolvencies, up 31 per cent, while previous boom-time state Western Australia recorded a 25 per cent surge, in the three months to September.

Going for broke

Bankruptcies and insolvencies (Sept 2008)

NSW 3391 +15.7 per cent
ACT 84 +31.2 per cent
VIC 2165 +10.4 per cent
QLD 1943 +7.6 per cent
SA 608 +7.9 per cent
NT 45 +15.4 per cent
WA 507 +25.2 per cent
TAS 264 +13.8 per cent
AUS 9007 +12.6 per cent

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51 Responses

  1. It gets back to the old problem with incentives and an unwillingness authorities to realise that the banking system has a lot to do with this mess.

    THE BIG LIE EXPOSED: Big banks ignored sub-prime troubles
    https://blogocrats.wordpress.com/2008/10/13/the-big-lie-exposed-big-banks-ignored-sub-prime-troubles/?referer=sphere_related_content/

  2. Thank you, Mr Howard…

    Where’s that bloody “world’s greatest treasurer” now!

    Still sitting with his head up his @r$e!

    Imagine if you owned a business and you said to staff – “…just do whatever you want…as long as I get $xxx a week in my bank account…la de da de da…

    …or own a rental home and never check the tenants – “…marijuana plants? What marijuana plants? A fine? Me? I just rented the home out?…well yes, I did think it was funny that they paid $1000 a week but – that’s business…not my fault…”

    Well the government rents our country, its resouces (including human beings) and needs to take control of banks and business – profit making is fine, profiteering is illegal!

  3. But TB,

    can’t you see that it’s all Rudd’s fault?

    Tony Abbott’s said to today that Rudd’s getting a bit full of himself.

    I mean he is only the Prime Minister after all..

    What does Tony do again? Shadow minister for irrelevance, or something….

  4. Guys it is all fair and well to blame the government for their warped sense of “welfare” via easy credit but let’s not forget that the overwhelming majority have simply spent beyond their means. Both of our countries have been living in false economies drunk on the “I want it now” for the past 15 years; it was only a matter of time. Many have maxed out all availble lines and only now realize that paying on a brand new car, house etcetera is not the same as owning it. I drive a ten year old economy car that sure doesn’t look like much but guess what, I own it!

  5. Sparta,

    That’s all very well.

    But it was you lot in the US that started the global meltdown by fobbing of your bad debts to other nations thinly disguised as “sound investments”.

  6. The blame can’t be sheeted home solely to individuals either as governments and financial institutions with governments’ blessings told them it was perfectly OK to spend big on credit, no more than that, they insisted it was their duty to do so for the good of the economy.

    Hawke/Keating started regimes where personal saving was more important than spending and Keating suffered because stalled spending meant a stalled economy. As the economy improved spending on credit increased but it was a measured increase well within the budget of household income, you can see this in any graph of credit spending from the time.

    Along came Howard and immediately implemented policies that encouraged spending above all other considerations. And this is also easily verified with graphs from 1997 onward showing a sharp and exponential increase in credit spending. Right up until his defeat last year the Howard government continued to stimulate spending at all costs above any other consideration and if they kept their election promises this would have continued.

    Now we have the situation where Rudd is setting up stimulus to get people to spend (which by default must mostly be on credit) whilst at the same time record amounts of people are going broke because of overspending on credit.

    What a friggin’ mess.

  7. Reb,

    Really man, do you really believe the rest of the world is that ignorant?

    “What a friggin mess”

    Well at least we can agree on something Adrian!

  8. “Really man, do you really believe the rest of the world is that ignorant? ”

    No I believe that a number of American Financial institutions deliberately sold bad debt to other nations and packaged it up with some good to debt to make the credit rating look good.

    This was deliberate false representation by those institutions.

    It’s not a matter of other nations being “ignorant” it’s a matter of US financial insitutions being deliberately deceiptful.

  9. Well I have no doubt American institutions sold worthless paper is it not the job of those buying it to do their homework first? Even GW and company saw what was happening and tried to clamp down which isn’t saying much for rest of the world. Perhaps what is even more alarming is how willingly other countries followed the same model, Australia for instance. “Debt Land” on Four Corners shows the same schemes being put into practice without the need for bad American paper. Are American’s to blame for Australians biting off more than they can chew as well? There is a reason why we have a credit rating/FICA scores, perhaps we should all start using such measures again?

  10. In the ‘All points West’ blog just a few weeks ago the question was: Is Australia’s economic miracle a mirage?

    My answer was simple: Mirage! was my answer and to quote Michael West:

    “The shape of the world economy has changed in the last 18 years. China has boomed.

    Although Australia’s GDP growth has historically tracked the US, this time we are in a particularly fortunate position of having a mining boom (although commodity prices have begun to come off sharply). And Government debt is not an issue.

    That said, Australia like the US is a current account deficit country (currently 6.2% of GDP) which means our banking system borrows from the rest of the world to support our lavish lifestyle.

    No longer can this country rely on a debt-funded spending spree to fuel a recovery. This is bad news for both the banks [business] and the consumer.”

    I know Howard and Costello laid claim to being the masters of the economy and interest rates but that is simply no longer a viable claim, and it never really was. They were simply riding a favourable economic wind.

    They were also front and center when it came to cheering Australian who took advantage of artificially low interest rates by taking on boatloads of debt. Nor did they monitor the lending practices of the financial sector, in spite, in spite of the obvious lending lunacy that was going on.

    Our banks assure us that we are in a stronger position than the US to cope with any fallout, I tend to be more skeptical. Our banks have surely been aided in earning record profits off the back of complex and risky debt arrangements with other lending institutions, businesses, and individuals in recent years? This has been a global issue, not just one relating to the US alone.

    Rewind back twelve months and I can still hear Howard repeating the same dangerous mantra “interest rates are lower and people can borrow more.”

    Howard said the heavier debt burden reflected rising affluence.

    “It is the case that people are buying ever more expensive houses, and they are doing that because of a number of factors,” the Prime Minister said. “One of them is that interest rates are lower and people can borrow more.”

    Yes, our hero was pushing a dangerous mantra indeed. In his opinion, it seemed as though a new era had arrived under his leadership.

    He then went on to say: “Debt levels are rising, but we are choosing to use the debt more productively to buy assets that traditionally rise in value, like shares and property.”

    At around the same time the Reserve Bank’s figures on household finances showed that assets were rising faster than debt (in spite of many Australian’s carrying record levels of debt). Households, they claimed had assets, including housing, superannuation and other investments, that are equal to eight times their annual income.

    Mark Davis, author of The Land of Plenty writes:

    “Australia’s ‘age of prosperity’, as Peter Costello calls it in his memoirs, has been underwritten by the mining boom (even as manufactured exports stagnated during his tenure) and massive increases in household debt (now more than $1 trillion – about the same as the annual national output), even as the government has wound down its own debt. The national debt has in effect been privatised while, at the same time, risk has been shifted away from government and business onto the shoulders of ordinary people, in the shape of long working hours, casualisation, and the sort of uncertainty that is written in the fact that Australians take the least holidays of any western nation.”

  11. Hi Sparta good to see you found your way here as well.

    I think Adrian is correct here:

    “The blame can’t be sheeted home solely to individuals either as governments and financial institutions with governments’ blessings told them it was perfectly OK to spend big on credit, no more than that, they insisted it was their duty to do so for the good of the economy.”

    In the US the minimum wage has been basically stagnant for about the past 10years. The reason people who couldn’t really afford loans were getting them is because the banks actively encouraged it. Why? IMO, because growth is the sacred cow of capitalism. Nevermind that infinate growth is impossible on a planet with limited resources.

    The same reason is why their is so much easy credit in Australia. Gotta have that growth.

    If wages aren’t increasing but the cost of living is, the only way many can continue to consume is by getting credit.

    Responsible Govts would not have allowed this to go on. But then they (Libs and ALP, Republican and Democrat) all worship at the alter of the Free Market.

    The fact remains that people who have little or no money can’t spend it. Now many can’t pay back and even though you would like to blame them, that is a complete cop out.

    Allow people an income that covers not only essential requirements, but also some left over otherwise they can’t consume.

    Before someone mentions McMansion’s, remember how few people in Australia are actually buying their own home, as opposed to renting. Rents are unbelievable these days.

    For these people the interest cuts don’t help either because they will not receive a decrease, just because the owner gets a decrease.

  12. I’ve been better for some time that our banks are not as secure as we’d like to think. And it’s not the bad debts they’re exposed to in international markets that are the greatest danger, it’s the amount of debt each of us is carrying at record levels. Note ‘the asset binge that started in 1996′ who was elected that year?

    Big banks’ debts keep on piling up
    http://www.theaustralian.news.com.au/business/story/0,28124,24618409-643,00.html

    THE nation’s major banks are likely to at least match their 2008 credit losses of $7 billion in the current financial year. Some experts are predicting the final figure will go “significantly higher”.
    Renowned sector bear and JP Morgan analyst Brian Johnson declined to reveal his forecast for the industry’s total impairment charge — a bad omen in itself, given he is not usually short of a word.
    “But the correction we are having is going to be savage, after the asset binge that started in 1996 ended in the third week of July last year,” Mr Johnson told The Weekend Australian.
    “Industry bad debts will be significantly higher this year.”

  13. It’s not a matter of other nations being “ignorant” it’s a matter of US financial insitutions being deliberately deceiptful.

    And as recient history has shown it is not just US financial institutions that are loose with the truth.

    Still haven’t found those WMD’s.

    Still I don’t completely blame the US. Fool me once shame on you, fool me twice shame on me.

    It is high time our politicians and their advisors actually thought for themselves rather than following each new fad from the US as though it were gospel.

    Otherwise why bother paying them?

  14. Okay, I’ve been ‘betting’ not ‘better’ and the answer to who was elected in 1996 was….

  15. And still the sales targets in the banks increase. Staff are refused pay increases or managed out because they fail to sell credit to as many customers as come in through the door. Their incomes are declining against the CPI and they are ever more desperate to acheive the unacheivable sales targets enforced by their employers. We all know that the credit cycle has to stop but the banks/finance companies want to sell everyone credit so they can make their profits and pacify their shareholders.

  16. Sparta,

    I find myself in a strange position, I completely agree with your comments.

  17. Well I have no doubt American institutions sold worthless paper is it not the job of those buying it to do their homework first?

    Sparta how can you make statements like that and then wonder why the reputation of the US has tanked so badly. That is if you are even aware that it has.

    Also for those right wingers who constantly go on about how ‘trustworthy’ our ‘good friends’ are.

    Question everything, ‘friends’ does not mean they will act in our interests. Hmmm and then theres that AUSFTA…

  18. It looks as if there is some pattern to the figures.

    States that had the strongest growth in housing prices have now suffered the higher share of bankruptcy. Many risked all on the basis of an endless escalation in price, fed by greed and basic economic ignorance.

    There has been an attitude of get more at any cost, gear against (which means risk) your own home, leverage your kids out of the real estate market by your own avaricious behaviour.

    The correct will be painful for those that have neglected to understand financial risk and exercise appropriate levels of financial prudence.

  19. Mark Davis is so right John. This is were mass privatisation has led us.

    The Govt has individuals now paying at varying degrees for health, education, housing (gutting of public housing so no low income housing creating further financial stress), and childcare (and what a mess that’s turned out to be).

    Costs for all services have risen exponentially, and we have been handed back a few $$ in rebates here and there, which make the private providers wealthy, and leave less public money available for public services.

    We end up paying more for services and generally the quality suffers in the long term. Money paid to CEO’s and shareholders can not be spent increasing wages, or improving the service.

    We all believed the lie that because “the private sector could do it more efficiently we would receive the benefit of lower cost.

    Well we still pay the increasing costs, and have lost the collective income the service generated.

    So what are our elected ‘representatives’ going to do? Why are they not denouncing this discredited system, and finding a new way?

  20. I thought the coming crisis was painfully clear even long before I posted the following comments:

    http://blogs.theaustralian.news.com.au/geoffelliott/index.php/theaustralian/comments/us_news_media_is_dominated_by_shouting_matches/asc/
    John McPhilbin
    Wed 29 Aug 07 (05:21pm)

    I, like yourself, Geoff, have been expecting an economic slowdown and some major correcting for some time now.

    The obvious increasing prevalent the use of debt to fuel economic growth (including the staggering use of credit cards for daily living expenses) has been used to create a number of bubbles (i.e. stocks, housing, and consumer spending) and needs some serious attention by way of effective government intervention and controls.

    Just how deep and wide these corrections will be is hard to really tell.

    We seem to have been lulled into a false sense of growing affluence which is ironically the same phenomena that preceded the Great Crash of 1929 and the Great Depression that followed.

    Jacob Saulwick of the London Telegraph wrote on June 26 something that really caught my attention:

    “THE risk of a 1930s-style economic slump” he claimed “has been heightened by “euphoric” markets tapping cheap global credit, one of the world’s pre-eminent financial institutions has said.

    In its annual report the Bank for International Settlements noted that the conditions which led up to the Great Depression of the 1930s and the Asian crises in the 1990s were reflected in the current environment.

    “Each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a ‘new era’ had arrived,” the bank said.

    The BIS, the central bankers’ bank, pointed to a confluence of worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.

    “There is a high degree of complacency, coming out of the long period of low interest-rate environment, and a low volatility environment,” Singapore’s Second Finance Minister, Tharman Shanmugaratnam, said.”

  21. 19. TracieofFNQ

    Spot on Tracey, most of us got sucked in BIG TIME

  22. Lizzylou, this is why I am rather dirty on Keating/ALP for privatising the CBA.

    Business only cares about business. Any care for customers is feigned and self interested.

    It irks me that banks have the gall to charge transaction fees for teller service and using ATM machines. What the??

    No wonder ‘regulation’ is such a dirty word.

    It about time that changed.

  23. #18 Tom, it is not only the people who borrowed beyond their means that are at fault but the banks that lent them the money knowing that they would probably end up defaulting on their mortgage. Actually I’d say that the banks deserve more criticism because in most cases they would have been more knowledgable about the inherent risks than the customers. That is to say, the banks should have had more decency than to issue loans to customers who the banks would’ve known had a high probability of defaulting.

  24. The correct will be painful for those that have neglected to understand financial risk and exercise appropriate levels of financial prudence.

    In a responsible world Tom, banks would be forced to explain this to them.

    In fact many of us (not being experts) TRUST those who are advancing the loan. If not the banks have become little more than loan sharks.

    This is the fault of Govt and anyone else who had mindlessly (or selfishly) bayed for deregulation

  25. Tracie & Alastair

    I think it is far too easy to simply blame institutions for lending. They are at fault big time for many of their practices – lending 110% of the value to cover stamp duty, ensure there is enough borrowed to buy a houseful of new furniture etc.

    BUT the basic responsibility is with those that chose to over commit themselves. No one else is responsible for their personal decision. The commitment to borrow and over extend is a personal one.

    I feel for the hardship that many will suffer, but individuals make decisions and live with the consequences, the housing bubble has been just that.

    And while I’m repeating myself, I’ll just repeat that I continue to have the view that the increase in the first home buyers grant is poor policy. The billion(s) ought to be better targeted, it is only intended to prop up already inflated real estate prices, and will make little/no discernable difference to building activity and employment in that industry.

  26. I wonder how many tens of thousands of dollars we will be offered in credit this week…last week was a bad one…a tad over $36,000!

    Got a call from Citibank or how you spell it last week…I would love to know how they got my private, private phone number!

    It was an offer to pay out my credit card and charge me very low interest until I was hooked…I told the person that I don’t have one of those things because I do not live on credit…that did not stop this person from persisting.

    I then told him that my taxable income last year was just over $12,000 but that did not stop this person, he just started waffling on that I should have one as an insurance policy in case I hit bad times.

    At this point I lost my patience and had a spray at him concerning the blatant irresponsibility of his employer and called him a pimp of greed that has stuffed up so many people’s lives by putting them in a situation that would end in possible bankruptcy and they could lose everything and don’t dare calling me again.

  27. BUT the basic responsibility is with those that chose to over commit themselves. No one else is responsible for their personal decision. The commitment to borrow and over extend is a personal one

    Do you seriously believe anyone ‘makes a commitment to borrow and overextend’. You can repeat that until you are blue in the face. How are people supposed to know that they are overcommitting themselves unless the banks tell them, and refuse the loan.

    Many are/were desperate to escape the rent trap, but I find it extremely hard to accept that any person would get a home loan KNOWING they could not repay it, and eventually losing the house anyway. Could anything be more soul destroying than buying your own home at last only to see it’s value decrase and then lose not only the house but the money you have invested?

    The more believable scenario is that it wasn’t explained to them adequately, And I believe banks should have a duty to do this. Otherwise they should change their motto to “Caveat Emptor”.

    In fact I think that pretty much sums up the free market as a whole.

    You may well believe what you keep peddlling here, but I’m sure many who have fallen victim to this or who know people who have would not agree with you.

  28. Tom, I agree that both the banks and the borrowers are at fault, but I also stand by everything I said in my previous comment on this thread. I agree with you that the first-home buyers grant is poor policy – it inflates the market and doesn’t actually help first-home buyers very much in the way of affording a home. The way I see it – the scheme costs the taxpayers an awful lot of money without actually helping anyone very much.

  29. At this point I lost my patience and had a spray at him concerning the blatant irresponsibility of his employer and called him a pimp of greed that has stuffed up so many people’s lives by putting them in a situation that would end in possible bankruptcy and they could lose everything and don’t dare calling me again.

    Oh Scaper LOL.

    Better than having a go at the (probably) poorly paid employee I would write to the bank in question and then CC it to Rudd, Tanner and Swan

    Let the banks know you do not condone or support this type of behaviour and will be unlikely to consider their services in the future.

    If enough people do this, they may rethink their policy.

  30. Alastair the first home owners grant is ridiculous and only puts more public money in companies pockets.

    It is more bribery fo make people feel richer than they really are.

    Ultimately it still rests with the banks however. If they don’t want people to default, they should not offer dodgy loans in the first place. End of story.

    Put the tox in the chicken pen and then blame the chickens for getting eaten.

    Like I said most ordinary consumers who are not financial wizards would expect (and are entitled to) honesty and transparency from their bank or mortgage broker.

    Predatory lending is one of the uglier and more putrid symptoms of a market to greedy for it’s own and everybody else’s good..

  31. “Predatory lending is one of the uglier and more putrid symptoms of a market to greedy for it’s own and everybody else’s good..”

    Agreed Tracie.

    The Banks, in their pursuit of market share, were prepared to lend money to anyone with a pulse.

    Twenty or thirty years ago, people had to justify to the bank manager how they were going to afford and service a loan. Today the banks literally throw money at you.

  32. 30. TracieofFNQ | November 10, 2008 at 6:03 pm

    Don’t forget the government’s considerable role in fostering this as well. Despite warnings and supplications the government of the time continued to tell people they never had it so good and as long the government remained in power they would always have lots of jobs with ever increasing wages (remember the continuous boasts on how high wages were and the inference they would continue to go up forever). Spend spend spend people, and just to make sure you do we will always throw lots of middle class welfare at you because the revenue we are getting from a global resources boom is limitless.

    And the people did what their government and banks wanted them to because they trusted their leader because their leader said time and again “trust me” and “who do you trust”.

  33. 28. Alastair

    “I agree with you that the first-home buyers grant is poor policy – it inflates the market and doesn’t actually help first-home buyers very much in the way of affording a home. The way I see it – the scheme costs the taxpayers an awful lot of money without actually helping anyone very much.”

    I still can’t fathom the logic behind that move Alastair.

  34. Adrian like I said above I blame the banks, the Libs and the ALP.

    However, the ALP are now in Govt. They and nobody else can fix the rules to ensure this is unable to continue.

    They have a duty to Australia to do so. If not they are arguably worse than the Libs, as it has all fallen apart on their watch and they are the ones in a position to act and they must act not just decisively but RESPONSIBLY now.

    Especially considering the bank guarantee.

  35. “I still can’t fathom the logic behind that move Alastair.”

    Perception that they are doing something to help housing affordability, which they hope will translate into votes.
    Howard and co followed that path and now Rudd and co are doing the same thing. It’d be nice if they stuck to policy which was effective and prudent rather than political stunts like the first homer-buyers scheme.

  36. Are the following descriptions of responsible adult behaviour?

    “It’s not my fault I borrowed too much. The bank made me do it.”

    “Someone (else) should do something about my irresponsible borrowing”

    “I thought it would be fine to gear up in a rising market, after all house prices never fall”

    “How was I supposed to know I would not be able to afford the repayment?”

    “Blame someone else”

    “Someone else can take responsibility”

  37. The last people I look to for their views on the economy are politicians and central bankers. Professor Shiller’s view is always worth considering. His interview with Kerry O’Brian is a real eye-opener.

    Shiller: “Worst Times Ahead”
    http://calculatedrisk.blogspot.com/2008/11/shiller-worst-times-ahead.html
    Robert Shiller on forecasting and the economy …

    “This is not a run of the mill recession that we are in. This is a crisis of confidence that we haven’t seen since the Great Depression.

    Ultimately I think economic forecasting is more guess work than people realize. In times when you don’t have a fundamental change, you can exrapolate curves, and people do that pretty well. But right now I don’t trust extrapolation. It also – forecasting – depends on how the new government, how the new president, what he does, how he shapes confidence – and those are also unknowns at this point.”

    And many other interesting comments … “no one really knows what to do”, “we are getting into Ben’s nightmare scenario” … “and then we try some other heterodox monetary policies”:

  38. That’s right Tom. You prove the point again and again.

    Your arguments is that it is not the greed of the banks rather the greed of the borrowers.

    Oh well, whatever helps you sleep at night.

    I for one, am fed up with this ‘blame the victim’ mentality the right are so fond of. No responsibility for the banks though to act in an ethical manner right Tom?

    Where on earth are the ACCC in all this. In someones pocket I’d say.

  39. Tracie, you seem to ignore the point I made about financial institutions, where I said –

    “They are at fault big time for many of their practices – lending 110% of the value to cover stamp duty, ensure there is enough borrowed to buy a houseful of new furniture etc.”

    But often it is sooooo much easier to ignore simple facts that are inconsistent with a very narrow preconception, such as yours.

    You’d prefer simply to blame everyone, other than those that actually incurred the debt. Of course my comments acknowledge some of the other facets that you’d prefer to ignore.

  40. Fair enough Tom. You think both are at fault.

    I disagree for the reasons already stated. One should not neet to do an economics course to get a loan.

    As it is the banks risk, the onus is on them to qualify the loan – or it used to be as Reb said above.

    It is in the banks, the shareholders, the Govts and the public interest that banks not be allowed to offer shonky, unservicable loans.

    I would go so far as to say it amounts to fraud.

  41. TracieofFNQ,

    “If wages aren’t increasing but the cost of living is, the only way many can continue to consume is by getting credit”
    Hey Tracie, I don’t disagree with most of what Adrian says on this subject or you. I simply question why we all so quickly and like clock-work blame government and financial institutions while almost always giving a pass to the consumer? We currently have a dilemma where we are exporting jobs, importing cheap labor and spending beyond are means. Perhaps instead of getting more credit we should down size our lives a bit? Remember the days when we only spent what we had in our bank accounts? I am certainly never the smartest guy in the room but even I had enough sense to see the “farce” we were living through over the past 15 years. It is simply missing a large piece of the puzzle by giving the consumer a complete pass and blaming their poor decisions on others. Are governments partly responsible, you bet but on the flip side of the coin when have we ever been able to trust big government? Why do you think the consumer so blindly charged in purchasing beyond their means; simply for the good of the country? Human nature I am afraid. What did these institutions think was going to happen when we started lending to people with bad credit, no credit, no proof of employment, no proof of earnings or even to those weren’t even citizens with a permanent address? The consumer who signed the dotted line was well aware of what he couldn’t and could afford. The temptation was simply too much to resist for many. I say go after all who helped propagate this thing but the problem is everybody, consumer included, is guilty and currently pointing the finger at somebody else. The government is not the economy; we are just as much to blame as they sadly but saying so simply isn’t fashionable at the moment.

  42. John,

    “I find myself in a strange position, I completely agree with your comments.”

    It is ok John, I usually find myself in agreement with you on economic issues. We just tend to part ways on the foreign policy front. I am sure the regulars won’t hold this minor deviation against you, I hope!

  43. Sparta, for me the question about who is more responsible comes down to this: Who has the power in the relationship?

    Clearly Govt and banks are far more powerful than most ordinary consumers are. The finance industry has been screaming deregulation, and the politicians have complied.

    The previous Govt encouraged consumers to spend on credit, possibly knowing that being able to buy in this manner may distract them from the fact that they weren’t as well off as they were told they were.

    Predatory lending was/is condoned and encouraged even though some ‘in the know’ must have known that in the long term this was bad policy.

    BTW do you realise that many consumers built up cc debt NOT on plasma TV’s but on groceries? So many in fact that Woolies are now bringing out their own cc. Fancy those greedy consumers wasting money on food! To me it demonstrates how badly wages have deteriorated if people have to buy food and pay for electricity etc on credit.

    What is being done to rectify the situation?

    Are the banks now promoting responsible lending practises, or are they still encouraging all in sundry to get credit?

    Is the Govt moving to ensure that predatory lending is outlawed?

    Will the Govt move to improve wages so that consumers are not reliant on credit just to pay for essentials such and food, rent and utilities?

    If it is business as usual, again who is to blame?

  44. TracieofFNQ,

    Tell you what, take a look at the Community Reinvestment Act passed under Carter in the 70’s and then the Clinton additions of the 90’s and tell me if you feel the banks are as guilty as you say; welfare in the form of credit, a disaster waiting to happen.

  45. oh dear, more bad news:

    Business confidence collapses to record low – NAB survey

    Business confidence has slumped to a record low and fear now “reigns supreme” as firms worry about the prospect
    of a global economic meltdown, a survey shows.

    National Australia Bank’s (NAB) latest poll of 400-non-farm
    firms found confidence fell by an unprecedented 21 index points in October to minus-29 points.

    It was the weakest reading since the monthly survey began in
    1997.

    Meanwhile, the business conditions index fell 10 index points to a seven and a half year low of minus-11 points.

    “Clearly, the most marked feature of the October survey is the unprecedented collapse in business confidence – after a number of months of relative steady (but weak) readings, notwithstanding global turbulence,” NAB said.

    “It appears that the continuing volatility in global equity
    markets, emergency financial packages, falling commodity prices, and continuing talk of global recession have finally broken busines optimism and now fear reigns supreme.”

    NAB now expects official interest rates to be slashed to under four per cent in 2009, from a current 5.25 per cent. as a slowdown in domestic demand hurts the business sector.

    But I thought interest rates would always be lower under a Liberal government?

  46. Like I said Sparta Govt and the banks. Govt has been quite slavish in responding to constant calls for more deregulation.

  47. National Australia Bank’s (NAB) latest poll of 400-non-farm
    firms found confidence fell by an unprecedented 21 index points in October to minus-29 points.

    What industries do this 400 represent?

    I suspect that there will be an advantage to the employers…sorry, no pay rise because business is not good…just stay on your lower wage until things improve!

    Everyone that I know in business except a property developer tells me it has dropped off somewhat but that is to be accepted and in the building industry there is some form of sanity due to lower pressures to keep everyone happy.

    Sure, some will hit the wall because of their lack of real business acumen…it would have been interesting if the former government won the last election…slave-choices anyone???

  48. scaper,

    I think slave choices would well and truly be in place by now had Howard got back in.

    As Minchin aplogetically confessed – workchoices didn’t go far enough.

    The minimum wage would be out the window by now if the Liberal mob were in power, using today’s current financial situation to ram the changes through Parliament…

  49. Reb, being a business owner I could not stomach what was on the cards…I was once an employee and I believe that the workers are the powerhouse and should be treated accordingly.

    When I learnt about the twenty or so nuclear power plants and the prospect of a waste dump in the Territory I knew that they had to be defeated one way…or the other!

    Anyway, that is history now.

  50. “that is history now”

    Amen to that scaper.

    Apparantly Talcum is still trying to get some mileage out of Rudd’s alleged leaking of George Bush’s G20 gaffe.

    For Gawd’s sake…..

  51. Reb, one can not get mileage with one’s foot in mouth…is anyone listening to that person?

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