Australia's Private Debt Burden
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- Опубликовано: 6 сен 2024
- Australia’s gross household debt to income before tax ratio is the second highest household debt burden in the world. But how did Australian households become so indebted and what will this mean in the coming months and years?
Research from the Reserve Bank of Australia shows average personal debt more than doubling from $106,000 in 2001, to $350,000 in 2019. Average mortgage debt among older Australians has blown out by 600 per cent since the late 1980s, and that’s after accounting for inflation.
We should not allow ourselves to forget that in practice, the government taking a larger share of the debt burden has led to better outcomes for the Australian people than austerity principles that heap the debt burden onto households, and businesses. It is hard to say that the government is effectively serving the people when now, more than ever, Australian families are suffering under the weight of unsustainable private debt. The security provided by the government deficit approach enables a brighter future for Australian households, families and businesses.
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Sources:
Total Credit to Private Non-Financial Sector, Adjusted for Breaks, for Australia - Federal Reserve Bank of St Louis - fred.stlouisfe...
www.abc.net.au...
www.abc.net.au...
www.abc.net.au...
www.abc.net.au...
The Deficit Myth by Stephanie Kelton
www.businessin...
www.abc.net.au...
www.aph.gov.au...
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Why would it be good for governments to run large defecits?
So are you saying its bad for individuals, business to have high levels of debt but its good for the government?
Yes. Federal government debt (if you're a sovereign currency-issuing government) is nothing like household or business debt. It's more a measure of how much money the government has created for the economy, subtracting how much its taken out (e.g. via taxation).
So it could be good for the government to run a large deficit because it means they're literally growing the size of the economy by stimulating demand. The limitation on this for government is not that they'll be in debt to its own central bank, or its own citizens, the only limit is that it does not spend to much, thereby attempting to stimulate demand beyond the productive capacity of the economy.
If the government keeps spending and the economy is out of resources to create things to sell for that spending, then the government would essentially be paying more money for the same product, which we know as inflation. Otherwise the government is the only issuer of its own currency and there's no legal or physical limit on how much it can create by spending.
I graduated from Uni straight into the GFC of 2008, and yes, I cite the example of older people staying in their jobs for longer as being the #1 thing that affected my graduate opportunities. It lasted for years and I think still has impact.
"While this private debt might be good for banks and other lenders, it's bad for everyone else in the economy."
Daily reminder that politicians are often encouraged to care more about banks and other large corporations than most people in the economy, by the people running the former and exploiting the latter.
Would I be right in saying that the Australian government since Howard compensates for the decreased per capita spending that is caused by massive private debt by growing the population and adding more consumers? This is also props up demand for the overinflated housing market and the large number of Australians who rely upon their investment properties going up in value for capital gain?
The housing market is being held up by matchstick
@1:57
why do i feel like that's just due to house prices forever increasing?
Definitely a factor, but from memory the two metrics aren't entirely correlated.
Debt to wealth is more relevant that debt to income. Look at it like a balance sheet. As wealth increases (which is a good thing), nominal debt will always increase. Which when looking at the debt/income looks bad.
"Debt to wealth is more relevant that debt to income."
Given what we reference at 1:28 I'm not sure that's true. At least from the perspective of the economy.
"As wealth increases, nominal debt will always increase."
Why?
@@PEGSInstitute 1:28 is the wealth effect. The higher the net wealth (assets - debt) the higher the consumption.
Pull up a table of countries by net wealth, by private debt per capita and by gdp per capita. That shows that debt per capita reflects wealth not income. Probably most people consider the assets they hold when considering debt more than they consider their income. Although undoubtedly income is important, just not as important as wealth.
Mortgages are killing the middle class. People need to learn to live in the black.
Landlords are killing us too. Mortgage payments or rent payments, almost the same
@@ThomasBomb45 If faced with the choice of rent vs a mortgage, choose the mortgage, it is the lesser of two evils. At least when you're old and gray you will eventually own your home or pass the debt onto your children so they have a roof over their heads.
Not everyone has the opportunity to choose.