Paul Wallis at Digitaljournal.com shines a light one on of the bigger beneath-the-surface stories of 2009, which is the wild scale of Australian debt:
It’s a pretty hideous story. Our “recovery” and “growth” turn out to be debt based. Like one of the cartoons where the coyote keeps running for a while over going over the cliff, Australia’s debt is now more than GDP. 90 per cent of that debt is tied up in mortgages. The rest is various forms of personal debt. What’s much worse is that these figures have apparently been sitting around for a while, gathering accolades, not concern.
Now- the story here is that: 1. Australia’s GDP is just over $1 trillion per year. 2. Net debt is $1.2 trillion. 3. There are only 21 million people in the entire country. 4. The housing market was propped up by a Federal and State First Home Buyers grant for a year or so, which has apparently added fuel to the situation as interest rates rise. 5. Most houses are ridiculously overpriced anyway. 6. Debt levels currently account for 39% of income. 7. Stress levels on debts kick in according to analysts at 41%. 8. Severe stress starts at 43%.
That Australia is debt-fueld and bubbly has been talked about for a while, though defenders of Oz will in turn point out that as long as China maintains its incredible growth and voracious demand for materials, Australia is in fine shape. And to some extent that’s true, except that this is a huge “if” we’re talking about.
From the sound of it, it wouldn’t appear that China needs to crash, just hiccough and the whole thread could unravel.