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The Forum > Article Comments > Australia still the richest nation but don't celebrate just yet > Comments

Australia still the richest nation but don't celebrate just yet : Comments

By Alan Austin, published 16/10/2014

Australia has not always been the richest nation. It topped the table during the global financial crisis, thus bolstering the view of Joseph Stiglitz, Tim Harcourt and others that Australia handled the GFC particularly well.

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I just don't see it Alan, unless you actually equate personal debt with wealth!
Higher house prices invariably only ever equate to higher mortgage payments, higher Insurance fees, maintenance and rates etc, and higher replacement costs, when we up size or down size!
The only real winners here, the taxman, the banks/realtors/insurance/finance brokers, etc.
The really big economies have all but run out of pump priming debt creating capital; and, this kind of misrepresentation, just doesn't help?
Debt repackaged as real honest to goodness wealth, is part of the problem Alan!
Heaven help those home buyers, when govts need to raise interest rates, (soon) just to claw back some of the economy boosting injected capital!
What happens to absolutely essential, domestic economy supporting discretionary spending then?
Or perhaps, when debt burdened govts, renege on their debt burdens, on the grounds that a new even deeper economic downturn, (on the horizon, waiting in the wings) has made debt repayment and or servicing impossible!?
Leaving the world with little choice but to languish in the economic doldrums, at least until we reclaim our economic sovereignty, (energy and capital) and all that relies on it!
The high cost of energy is an economic weapon, that is killing many already overburdened economies!
And don't go on and say we are in a superior position, when you've yet to factor in record domestic debt, and record foreign debt coupled to, seriously declining terms of trade! (The big picture)
Yes there is a way out and forward!
It's just not repeating already tried and failed paradigms, accompanied by mono syllabic moronic mantras, straight out of the inmates running the asylum handbook!
Like, the Government has no business in business!
Doing what you've always done, will only ever get you what you've always got!
Rhrosty.
Posted by Rhrosty, Thursday, 16 October 2014 12:26:27 PM
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How refreshing to get a piece from AA that doesn’t follow the usual “Labor good; Coalition bad” mantra.

I agree with most of Alan’s analysis. Australia’s growth in wealth is something to celebrate, but shouldn’t be taken totally at face value. About a third of apparent growth in wealth is due to the exchange rate. House and share prices, and the exchange rate, are all volatile, and Australia’s apparent wealth could slip dramatically if any of these changes. The dollar is falling. Many analysts think house prices are over-valued.

Australia also enjoyed an unprecedented terms-of-trade boost from rising export prices in the 2000s, which greatly increased wealth. This is starting to unwind, and I suspect that will start to take a toll on the wealth aggregates in the next couple of years.

Rhosty

You are partly right. RBA data show that housing debt as a percentage of household disposable income rose from about 80% in 2000 to 137% in mid-2014. But the value of housing assets rose from about 650% to 800% in the same period. So net housing wealth increased. The trouble is that debt is much slower to fall than asset values if house prices start to fall.

http://www.rba.gov.au/statistics/tables/index.html#house-bus-fin (table E2)
Posted by Rhian, Thursday, 16 October 2014 2:57:38 PM
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Good morning all,
Thanks for these comments.
@Rhrosty: Yes, understand most people don’t feel like they enjoy the life of the wealthiest people who ever lived. But this study looks only at net wealth – what people actually own – not incomes, increasing costs, the tax burden, or contentment, or what we would like to own.
The measure Credit Suisse uses takes debt into account. So although household debt is high, the value of what citizens own is much higher. More than four times higher, in fact, for the population overall.
It is rare for anyone to own a house on which the mortgage is higher than the house value. Usually, after the first 5 to 10 years, the debt on the property is a smallish fraction of its sale value. And ever-decreasing.
Stocks and shares are usually held without associated debt.
So in itself it is not a misrepresentation, Rhrosty. Seen for what it measures, it is useful enough. Although if misused, it could possibly lead to misrepresentations.
@Rhian: Thanks, agree with all your observations.
Another helpful chart is here:
http://www.rba.gov.au/chart-pack/household-sector.html
Click on Household wealth and liabilities. Interesting to see that over the last three years, financial assets, dwellings and net worth have all risen, while liabilities has stayed pretty flat.
Cheers, AA
Posted by Alan Austin, Thursday, 16 October 2014 6:54:35 PM
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Australia is a bunch of lovely and lot of things , Everthing is there , still donot celebrate or we can say do not show off. For more information about australia visit http://www.babyography.net.au/ .
Posted by Ronalddowning, Saturday, 18 October 2014 7:47:14 PM
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