Wise words Saul.
Interest rates should be set by the market to reflect the balance between saving and borrowings. Allowing cheap foreign credit to offset lack of real domestic savings just forces people to adopt higher investment risk in order to stay ahead of inflation.
As for the property "boom". If an "investor" makes $1M from buying-sitting-selling...who pays the $1M? Clearly the process of buying-sitting-selling does not *produce* $1M in wealth, so someone else must pay....who is it? Ideally it is just the next buyer, but history shows that the "final" buyer before the crash will default and pass it on to the bank...who will of course pass it on the taxpayer and future customers. We now have 30% of our economy as "financial services"...personally I'd prefer tulip farms. (Farmers are so much nicer people than bankers; Much cheaper too!)
Yep, the current "boom" in credit and cheap ores will be paid for by your kids, (As will our environmental splurges)...aren't we gracious

Paul Murray made some interesting comments about all this, in
Wedneday's AFR.

Our net foreign liabilities amount to 60% of GDP. That is
extremely high by global standards.

More local savings could deal with it, but of course our tax
system is structured against saving. Better plough the money
into the family home, any profits are tax free, or negative
gear an investment property or two.

Now lets say we have a hiccup in China or foreign investors
lose faith in Australia, for whatever reason. Interest rates
would shoot up and there is nothing that the Govt or RBA could
do about it.

There would be much wailing and howling, as those with mortgages
up to the roof, lost their homes. House values would finally
crash, our property bubble popped.

It will happen one day, its just a question of when. Good times
don't last forever. They never have and they never will.

No doubt we'll only actually deal with these imbalances, once
there has been enough pain all around and enough licking of
wounds from the experience. Humans are quite predictable really.

Saul,It is about time you and others looked at the reality of this scamming banking system.The IMF creates money in its computers and loans it to Ireland pilfering their pension funds and putting them into more debt.

The fractional reserve system of banking is a thieving scam.Each year $ 91 billion of new money is added to our economy to equal increases in GDP + inflation.Our Commonwealth Bank and state banks used to create a % of this money as a tax credit.Now all of our new money is created as debt.If this continues,debt will consume and enslave us to a few powerful corporate elites.

If Australia had learnt its lesson delivered by Harold Holt, who was treasurer from about 1947 and Prime Minister until his drowning? in 1966, and had kept the top personal tax rate at 66.6% and had enough intelligence to raise the no tax level - about $30,000 today, we would be sitting in a very prosperous country. Unfortunately, The politicians and the CEO's of the news media and others would sooner see the country slide into a bankrupt heap rather than lose any of their booty, the same as those politicans who pretend they are going to make Australia a wonderful economy, but their only action has been to destroy it, and to increase their own salaries and perks - they are considering removing some perks, and increasing their salaries, but they haven't said that they won't take back the perks later, have they. They are only employees, and very poor ones at that. Would you employ any of them, you are now you know.

*and had kept the top personal tax rate at 66.6% and had enough intelligence to raise the no tax level - about $30,000 today, we would be sitting in a very prosperous country*

We are sitting in a prosperous country, Merv. But that world has
changed, with or without Australia.

Fact is most people have a sense of fairplay. At the moment the
top tax rate is half. Go beyond that and people get cranky and
rightly so. The smartest and best paid simply go and live elsewhere,
where taxes are more reasonable. We lose their talents and if
Australia is short of one thing, it is bright people.

Those remaining will think up new schemes to avoid paying tax,
transfer money offshore, which with our globaly econonmy is not
hard to do. Or they will simply work less. I've seen shearers
knock off, once they reached their quota, for they were not going
to sweat and toil, when the govt took most of it.

So your idea might have worked in the 60s, but would be a failure
today. Ronald Reagan figured that one out. When he decreased top
taxes, tax revenue actually grew, as more people decided to pay
tax in America, rather then shuffle it offshore.

Arjay,

Could you expand on the tax credit. I would be most interested to hear how it worked?

Yabby, I was working as an apprentice from 1945 and was a tradesman from 1951 till 1994, and I know that we had a good economy, good living conditions, but they have certainly deteriorated since 1971, most noticable over the last 20 years, ask any person over the 70 mark. Many other countries were the same, The Uk had to increase its top tax to 146.1% in about 1946, to deter obscene incomes - have a look on the internet "Tax history of Australia" all the states had their own personal tax until about 1946, and as the top tax in the '30's was about 20%, we had a depression - do you know what a depression is? Well the US is in one now, millions of workers are out of a job, but the CEO's are raking in up to $100 Million in salary. Look up "Tax history of US". In Australia, the statistics show that there is only about 5.6% unemployment, but the companies are employing their employees as little as 2 and 3 days a week, which is counted now as not unemployed. In fact, if the original system was used, it would show unemployment as about 17% the same as 30 years ago. If our politican ever get honest, and put the top tax back to the successful 66.6%, and our moron state governments stop exporting out natural resources, you will see what a good economy can be. Unfortunately, we have two chances, Buckleys and none. Also look up "Taxes around the world" and ask yourself what the politicans call it "Global economy" but each country is responcible in their own country, they are either traitors or idiots, and I don't blame that wiki guy for spilling the beans, there is a lot of corruption out there.

*but the companies are employing their employees as little as 2 and 3 days a week, which is counted now as not unemployed.*

Merv, they certainly did that during the GFC, for of course these
days, if you terminate somebody, a company is up for termination
payments, often enough in total, to send a company broke. Hardly
sound economic policy.

But how many are doing that today? I would suggest very few.
The AFR of last weekend for instance, carried an article about
Linfox. They are expanding their WA business and to try and keep
their truck drivers, their starting salary in WA is 118'000 a year.
Senior drivers in WA can earn 150'000 to 180'000, including
allowances and overtime.

Now in anyones terms that is huge money, available today, here in
Australia. Fact is that in the 60s people had a work ethic and
went where the work was. Not so today, where people expect a job
right where they live, or live from the 100 billion a year, that
we hand out as social welfare payments. So many simply need not
bother.

Meatworks, the fruit and vege industry and others, all depend on
backpackers and 457 workers these days to function. Aussies don't
want the jobs.

After the war, Australia did well as the place rode on the sheeps
back. Eventually the sheep collapsed from all the weight. Now
mining carries the weight.

England did go sky high on taxes and eventually realised it was a
mistake. Because anyone making serious money, moved their
address to Switzerland, Luxemburg, Monaco etc. These countries
became rich, by being reasonable.

In fact just recently, when the Brits talked of taxing bankers
extra, the bankers debated wether to move the whole lot to Geneva.

I repeat my point. Any more then 50% taxation is considered robbery
by most and it doesent work. People have options these days, like
never before.

Saul says:

//Not only is that causing considerable unrest among the Irish people at the implied erosion of national sovereignty, but it is also likely to prolong the current recession.//

Well...*duh*...of COURSE it will mean diminished national sovereignty!

But if you had TOLD the average irishman in the street that all these 'entitlements' and perks for the public service would mean that a decade ago...he would have laughed.

They are not laughing now! Instead...as they realize how screwed they have been...they are raging.

This 'Fiscal Disaster' is not a failure of capitalism but a triumph of socialism (E.U.) in forging ahead to a global government.

I honestly fear that we are approaching a fulfilment of Revelation 13

//It also forced all people, great and small, rich and poor, free and slave, to receive a mark on their right hands or on their foreheads, 17 so that they could not buy or sell unless they had the mark,//

more snake oil solutions from another snakeoil salesmen,
australia has had significantly higher interest rates than ireland and other countries, yet has an arguably higher property bubble if we are to measure the cost of housing to average income. what use is restricting publicly spending if there are no controls on other capital flow, running a surplus and depriving public investment does not stop the speculators borrowing off shore, nor does it prevent retail investors from doing the same, what it does do is reduce industry wide productivity, it stops investment in infrastructure to meet growing or shifting populations hence lower productivity. saul does not indicate higher taxes so it must be cut backs to services or future investments