Sunday, October 21, 2012

World finances begin to darken once more

We’ve been away for few days (up “The Camp”) and since we got back I’ve been catching up in the world political and financial news.

Europe is in a grim state with Greece, Italy and Spain particularly facing severe financial worries and beset by strikes and protests, Now, today, I read that the UK’s Prime Minister – David Cameron, in case you’ve forgotten who it is – is facing turmoil at home as he introduces further ‘austerity cuts’ to the Conservative governments budgets. These on top of the “One fifth reduction in all departmental budgets” he introduced when assuming power in 2010.

Australia, up until now, has weathered the GFC fairly well but not without some impacts. We have experienced great reductions in self-funded superannuation returns that have effected the income of many retirees. Older Australian have been forced back into an ‘aged work force’, a ‘grey army’ of workers where previous administrators, accountants, teachers, etc and sundry professionals are working as shelf stackers in supermarkets to fund their continued subsistence-driven existence. (My Rhonda would love to retire but her income is the only thing that keeps our head above water and thank God we own our own home and cars and have no debts.)

This week the Bank of Queensland, a state-owned entity - declared a loss of $15 billion and I fear this is a sign of things to come.

Mining companies, once heralded as the saviour of the Australian economy, are shutting down operations and laying off staff as overseas countries cannot afford to buy (pay for) their goods.

Cubbie Station - Australia's largest cotton producer

Concerns have been raised over the Government's approval of a foreign bid for Australia's largest cotton farm, with Nationals senator Barnaby Joyce labelling it "a disgrace". Treasurer Wayne Swan has approved a consortium made up of Chinese and Japanese investors to make a bid for Cubbie Station, near Dirranbandi in southern Queensland. The station was placed in administration three years ago with debts of more than $300 million. Cubbie Station has man-made water reserves seven times the content of Sydney Harbour but this is reckoned ad only enough to get them through another two years if there is no follow-up rain in the tropical north.
Owning the “quarter acre block” with its three bedroom with en-suite brick veneer is a far disappearing Australian aspiration as many younger people accept the inevitability of the realisation that they will never be able to raise a family and be ‘home owners’ at the same time. Only this week it was announced that some 40% of Australian home purchasers, the majority those who purchased their first home after the GFC hit, are in serious trouble - forced to pay-off mortgages higher than the value of their property.

Those in this latter group are finding that they owe more in mortgage repayments then their home is worth in the market place.

I have met more and more builders and other tradesmen who are working out of their home, taking ‘cash jobs’ wherever possible, to earn and income and doing lots of small repairs, renovations and additions from those who have the cash to pay for such.

Latest Australian Tax Office reports are that more of Australia’s elderly pensioners – those lucky enough to qualify for a government pension and its prized health care, transport and other benefits like household rates reductions - do not trust banks and are holding their cash, in hand, at home so that it is not being declared and reducing their pensions.

It doesn’t look good for the world, in my humble opinion, and I suspect we are heading for another turn of the GFC “Screw”.


Gill - That British Woman said...

we too have weathered the storm.....sort of here in Canada, but like Australia I think the storm clouds are approaching.


JohnD said...

My greatest fear is that the great multi-national corporations will force the opposing businesses out of the marketplace and we will be faced with huge monopolistic conglomerates who will manipulate the economy to their own profitable ends!

AstridsSoapbox said...

John, do you think the Oz government will eventually start taxing superannuation? Surely someone's got to pay for the upkeep of the country don't they?

JohnD said...

Super is already taxed by the Australian taxation system at three points: on contributions received, investment income and benefits paid.
Pension amounts are taxed as normal income through the Pay-As-You-Go tax system. There is a 'tax-free threshold' for low super recipients.

Any additional tax on super would be political suicide.