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Yeah, but if the average Australian owes 1.6 times their annual salary, and house prices are 6X income, and they also have 2 years income locked into superannua

by wisty 16y ago

Yeah, but if the average Australian owes 1.6 times their annual salary, and house prices are 6X income, and they also have 2 years income locked into superannuation for their retirement (go boomers!), then things could go bad. Ask an American, English, Irish, Greek, Icelandic, or Japanese poster.

nl 16y ago
I don't understand what you are saying, but it seems to me you are confusing cause and effect. Yeah, but if the average Australian owes 1.6 times their annual salary, and house prices are 6X income, and they also have 2 years income locked into superannuation for their retirement (go boomers!), then things could go bad Yes, if you have a high level of debt and things go wrong then it's not a great place to be. But there needs to be something else to make things "go bad", and for it to be a significant problem it needs to happen quickly, before people can adjust their debt levels based on economic signals like an increasing unemployment rate. A very sudden collapse in commodity demand from China could cause a crisis like that, but a sudden drop like that seems unlikely to me. (If you disagree, explain what you think happens in China to cause such a rapid change) A more likely scenario seems to be a slow decrease in demand, occurring over many years. A slow slowdown in demand allows people to change their debt levels, and while individuals may have problems it is unlikely to cause a huge crisis beyond a higher unemployment rate. Given Australia got through the biggest financial crisis since the 1920's in pretty good shape I think automatic pessimism is unfounded.
- barkingcat 16y ago
  The two things that could cause Chinese demand to collapse is war, or a people's revolution. Both will be very very bloody, and you would worry about other things than just property value or annual salaries. Be afraid for your life, no matter where on the globe you live. As a Taiwanese, I always feel that tension on the bead, that possibility that either World War 3 or the world's largest and bloodiest popular uprising would erupt before my eyes, perhaps on the back of some trivial issue, like denying China the ore that it wants.
  - nl 16y ago
    The two things that could cause Chinese demand to collapse is war, or a people's revolution. Both will be very very bloody, and you would worry about other things than just property value or annual salaries. Yes, that's my view too. I don't think it's possible to hedge against the collapse of China. The effects are just so unpredictable. For example, the traditional hedge in times of crisis is to move money into some kind of physical reserve, eg gold. Increasingly people try and hedge at a macro level by buying into gold producing companies instead of the physical object itself. Ironically, that would mean increased demand for Australia's Gold companies - so money might be reallocated from Australian iron ore companies like BHP Billion & Rio Tinto to Australian gold mining companies like umm..... BHP Billion & Rio Tinto. Now I'm not saying this would happen - just making the point that it's difficult to predict exactly what would occur.

by wisty 16y ago

nl 16y ago

I don't understand what you are saying, but it seems to me you are confusing cause and effect. Yeah, but if the average Australian owes 1.6 times their annual salary, and house prices are 6X income, and they also have 2 years income locked into superannuation for their retirement (go boomers!), then things could go bad Yes, if you have a high level of debt and things go wrong then it's not a great place to be. But there needs to be something else to make things "go bad", and for it to be a significant problem it needs to happen quickly, before people can adjust their debt levels based on economic signals like an increasing unemployment rate. A very sudden collapse in commodity demand from China could cause a crisis like that, but a sudden drop like that seems unlikely to me. (If you disagree, explain what you think happens in China to cause such a rapid change) A more likely scenario seems to be a slow decrease in demand, occurring over many years. A slow slowdown in demand allows people to change their debt levels, and while individuals may have problems it is unlikely to cause a huge crisis beyond a higher unemployment rate. Given Australia got through the biggest financial crisis since the 1920's in pretty good shape I think automatic pessimism is unfounded.

barkingcat 16y ago
The two things that could cause Chinese demand to collapse is war, or a people's revolution. Both will be very very bloody, and you would worry about other things than just property value or annual salaries. Be afraid for your life, no matter where on the globe you live. As a Taiwanese, I always feel that tension on the bead, that possibility that either World War 3 or the world's largest and bloodiest popular uprising would erupt before my eyes, perhaps on the back of some trivial issue, like denying China the ore that it wants.
- nl 16y ago
  The two things that could cause Chinese demand to collapse is war, or a people's revolution. Both will be very very bloody, and you would worry about other things than just property value or annual salaries. Yes, that's my view too. I don't think it's possible to hedge against the collapse of China. The effects are just so unpredictable. For example, the traditional hedge in times of crisis is to move money into some kind of physical reserve, eg gold. Increasingly people try and hedge at a macro level by buying into gold producing companies instead of the physical object itself. Ironically, that would mean increased demand for Australia's Gold companies - so money might be reallocated from Australian iron ore companies like BHP Billion & Rio Tinto to Australian gold mining companies like umm..... BHP Billion & Rio Tinto. Now I'm not saying this would happen - just making the point that it's difficult to predict exactly what would occur.