Not giving credit on the due date

Not giving credit on the due date

An amazing announcement this week revealed that since October 2007, $29 trillion has been wiped from the world’s wealth equity markets which equates to approximately fifty per cent. Private debt today, in America is $41 trillion, almost three times the $14 trillion GDP. Now we are witnessing governments across the globe buying debt in a last-ditch, unprecedented effort to prop up ailing banks.

The speed for greed has well and truly exceeded the safe speed limit and many institutions have received speeding tickets. Many governments have now become tow trucks and panel beaters and some institutions have become write – offs. What remains to be seen is who gets back on the financial highway again.

Australia is quite different, being one of just a few countries that remain in budget surplus, thanks to the Howard government that paid off its inherited $96 billion debt from the previous Labor government. It is purely coincidental that our last two significant economic declines identify Labor at the helm of our economy – now it is fortunate that it inherited a $20 billion surplus.

This week we saw the Rudd government inject $10.4 billion (of its inheritance) in an effort to buy back the confidence of the economy. I don’t believe anyone could argue against the decision to provide a $4.8 billion down payment to pensioners, payable in December and the $3.9 billion in support payments to families. I do question the $1.5 billion payment to first home buyers or as I read in an online blog this week. “It’s like throwing lollies onto a busy road so kids will go after them.” I agree, and in my opinion, the inflation rate will quickly jump well beyond five per cent with this cash injection. The “inflation genie” has now well and truly left the bottle and the Rudd government missed a defining moment to address our rental crisis. This ongoing crisis remains today, a major accelerant in the inflation equation where one third of our inhabitants rent property.

Australia’s immigrant intake has doubled over the last ten years and Macquarie University researcher Andrew Markus estimated that of 21 million Australians, a quarter were born abroad – twice that of the United States and three times that of Britain. The Prime Minister is now flagging immigration numbers for review.

It is well documented that rents will continue to rise given that vacancy numbers are at record lows. Availability continues to decline with investors leaving the property markets as a direct result of state government greed. If one invests in the share market they pay a brokerage fee and Capital Gains Tax on the sale (if you make a profit). Buy an investment property, you get hit with Stamp Duty and an annual Land Tax fine. When you sell you then pay Capital Gains Tax. A triple dip with property and a single dip with shares!

Just as ironic was Rudd’s attack on fat-cat salaries this week within the banking fraternity (they also paid a motza in income tax) yet no mention of the billions of dollars that Labor state governments have wasted over recent years. Despite the huge salaries, none of Australia’s banks are insolvent as is our very own NSW government. Bank salaries pale into insignificance compared to the billions of dollars wasted by our state governments. The revelation this week, that a Dubbo hospital borrows supplies from the local vet identifies a significant problem. No wonder NSW has a ‘flee’ epidemic or should that be flea?

Infrastructure Australia – the Federal government’s latest brain child continues to suffocate and fat-cat salaries within Labor NSW have contributed to today’s insolvent budget. In recent times, our banks have contributed much more to our economy than State governments.

With unemployment set to double and possibly treble in coming years (currently 4.3 per cent) maybe Mr Rudd needs to investigate Payroll Tax where businesses are taxed for employing people. In NSW, Payroll Tax is the greatest cancer that businesses face – another fat – cat governmental levy that will escalate unemployment.

With the Australian dollar falling below 70 cents we are chasing the expat market as with all that is going on in the global economy, record numbers are returning home. One of the most popular online daily reads is www.businessspectator.com.au
where some of Australia’s leading business journalists write about world economic events.

Real Estate Media Group (REMG) promotes its property portal on each article page where in September 2008 Business Spectator attracted 5,166,773 worldwide page impressions. This week we joined REMG Unique Homes as we continue to search new property market opportunities for our vendors and purchasers.

We have experienced firsthand, the October 1987 stock market crash, 1990 – 1993 recessions, Asian crisis and the dot.com collapse. This is the first economic correction where we have the Internet at our disposal.

This time around we have come well prepared – we have been practicing this for eight years. ^__^

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