Sub Prime lending in the US has no comparison product here in Oz. The closest is a product with a savage non bank lender who charges like a wounded bull and if you have to use them you may as well sign the deeds and hand over your house because they will get it in the end.
The yank market went after the great unwashed and conned them into taking on loans some of them could never pay No Income No Job or NINJa s as the market calls them. Where we all got involved is some clever SOB "wrapped" a hundred of these loans at a time and securitised them with foreign banks and anyone willing to buy a piece of the action. The twisted logic was that out of a hundred loans only a small percentage would default....how wrong they were. These instruments were traded all over the planet and no one really knew what their exposure was to them.
I could be cruel and say the big banks have repeated the ninties all over again but this time they lent to the other end of the high risk market.
Where it is different here is interest rates whilst pretty low by oz standards is still relatively high by world standards. The mistakes of population control in the perverse idea of allowing Sydney to expand as it has with limited scope for large scale land development to keep pace with populatiuon housing growth forced a price bubble in Sydney real estate that was easily supported by lowish interest rates. This price bubble spread right around Australia. Little hamlets in Tassie were ravaged in as little as five years to go from cheap affordability with no jobs to increased market value with no jobs fueled by asset rich Sydney investors . Even as far as wheat belt towns in WA felt the touch of the east coast bubble. Darwin with its combined military build up and resources boom has forced up prices and that same situation in Perth and environs fueled by their own resource boom. Banks are tightening up on WA and NT as we speak because of this. Buyers are having to stump up more deposit to purchase in those states and THAT is what is going to force a collapse in those states of over-fueled land and house prices. Owners will not be able to easily offload an overgeared house in this market.
Cashed up Sy and ML folk chasing better surrounds in more temperate climes started the flood of investment right around the country. If you ask me the Reserve has stu
big time with the last four rate increases. They were not required. Trying to bludgion a mythical inflation gene has just suddenly disappeared up in a puff of magic hokuspokus. The inflation number is still there! The foolishness of this incoming government trying to create an image of better fiscal managers has , in my opinion, forced the economy to take a deep suck and, in the ensuing mind rush, start to panic for no reason. In the last six months there is a sharp as I have every seen drop in consumer confidence. Is this the same country that survived the tech wreck? the asian crisis when all the paper tigers went up in smoke SARS and September 11th? Nothing has changed internally except a higher dollar(..not any more
)
For the last five years I really thought we had finally beaten the idea that if the US sneezed we caught pneumonia. Now we are back to where we were fifteen years ago. My next bet is the Reserve is going to cut another full 100points and then hang on for the Keating rollercoaster of 2.0% rate changes that WILL break the back of land and house owners in Australia.
CC, you are quite correct. No politician can control what happens to the market. However, what they say, if they say it often enough, the sheep will eventually believe. Australia has been conned. Go and read up on monitary policy with the Banks. THEY MUST GUARANTEE ALL ACCOUNTS HELD since the demise of Pyramid in Vic. Political grandstanding! They must hold in cash the equivalent of all moneys lent on homes.(edit- I will get a ref for this) Australian banks are the most tightly secured banks in the world. Thats why they are four amongst the top ten in the world. Not becuse of their brilliant management...because we(through the government) made them that way.
Just watch now for a spree of big government projects around the country to pump prime the economy and try and revitalise the fragile confidence of business to start to invest in infrastructure.
I am soooo p
off that we allowed ourselves to get sucked in..again!
We really do deserve the government we vote for!
No mind, I know the way out.