does the current situation in aus remind anyone of ireland circa 06

raymann

by that i mean this reliance on construction/immigrants and resulting high price inflation that you can see there?

the reason i ask is i was discussing this with a friend who was considering moving there but after researching hes changed hie mind. his reason? its just like ireland used to be. he says he cant bare the thought of losing his job all over again and having to restart agin.


any thoughts on this?

Doc

Dose that make me Polish?

Stinicker

Yes I saw similiarities when I was over there last year, however unlike Ireland building houses, Australias boom is mainly based on Mineral exports to the hungry Chinese and Asian markets. Now when demand drops of for them whole world economy will be in a bad way!

jackbhoy

It's funny how every Irish person is an expert economist now

Expensive houses aside, I see very few similarities with Australia. Their immigration is based on it being one of the most desirable places in the world to live, with immigrants moving there for lifestyle, climate etc. Irelands immigration was mostly eastern Europeans trying to make good money so they could set up a good life in their home countries. Very few moved here with view to staying for life.

Our economy was massively dependent on building houses and selling them to each other. Australia is dependent on some of richest mineral resources in world that are in massive demand globally. That might slow down somewhat but it's hard to see a collapse in demand for something that is only getting scarcer as decades go by.

I am by no means an expert but i find it very hard to see Australia going through what happened in Ireland when many of the underlying causes of our mess don't exist there. I think people forget what is happening here is unprecedented and is way beyond the normal boom and recession cycles of western countries. Unless they elect an Aussie Bertie "I didn't do it" Ahern I think they're safe enough!

hussey

raymann wrote: »

by that i mean this reliance on construction/immigrants and resulting high price inflation that you can see there?

No - it's been like this for a few years now

ballooba

Stinicker wrote: »

Yes I saw similiarities when I was over there last year, however unlike Ireland building houses, Australias boom is mainly based on Mineral exports to the hungry Chinese and Asian markets. Now when demand drops of for them whole world economy will be in a bad way!

Actually the Australians derive the same amount of income from housing as they do from mining. The mining story is similar to our corporation tax story. It's important but it won't save us/them.

raymann wrote: »

by that i mean this reliance on construction/immigrants and resulting high price inflation that you can see there?

Absolutely. Construction is about equal to mining in terms of contribution to the economy. Immigration had been a big source of demand for housing but that has seriously slowed down. The government cut back to try and reign in unemployment but I think they're realising now that employment depends on the money these migrants bring and also their capacity to take on huge wads of debt. As for property affecting inflation, there are some absurd examples of commercial rents like Pitt St in Sydney and Queen St in Brisbane. People are living in cloud cuckoo land here.

brendansmith

jackbhoy wrote: »

It's funny how every Irish person is an expert economist now (1) Takes pi$$ out of OP, claiming that OP thinks hes an expert economist

Expensive houses aside, I see very few similarities with Australia. Their immigration is based on it being one of the most desirable places in the world to live, with immigrants moving there for lifestyle, climate etc. Irelands immigration was mostly eastern Europeans trying to make good money so they could set up a good life in their home countries. Very few moved here with view to staying for life.

Our economy was massively dependent on building houses and selling them to each other. Australia is dependent on some of richest mineral resources in world that are in massive demand globally. That might slow down somewhat but it's hard to see a collapse in demand for something that is only getting scarcer as decades go by.
(2) Lets fly about differences and similarities between Economies in a way that tells the reader that this guy thinks himself to be an expert economist

I am by no means an expert (3) Denies that he is an expert economist but i find it very hard to see Australia going through what happened in Ireland when many of the underlying causes of our mess don't exist there. I think people forget what is happening here is unprecedented and is way beyond the normal boom and recession cycles of western countries. Unless they elect an Aussie Bertie "I didn't do it" Ahern I think they're safe enough! (4) Lets fly once again in a way that tells the reader that this guy thinks himself to be an expert economist

I love lamp!

AngryHippie

It does seem that property prices are well in excess of what the average wage can afford to finance, and the best and biggest wages are being made in the construction, mining and finance industries, which would be the first to suffer in the case of a property slump, so yes it seems to have the same weaknesses and the same sort of stretch marks in the same places, some of the major differences are that the banking and mortgage sector is dominated by the big four, and they seem to be relatively conservative operators, so I doubt they are going to get away with or attempt to get away with the sort of criminal behaviour that happened with Anglo Irish.

Are property prices the main indicator of the health of the economy? No, public sector debt is also a key indicator

If the new build house construction industry slows, is there alternative work for skilled tradies ? At least 2 years worth of reconstruction in QLD

Is the federal govt. capable of handling a financial crisis ? Probably, either the ruling party or opposition seem pretty competent compared to what was sitting in Ireland


who knows

jank

Im no expert but I know that it is not the same.

ballooba

AngryHippie wrote: »

If the new build house construction industry slows, is there alternative work for skilled tradies ? At least 2 years worth of reconstruction in QLD

We've had a slowdown in building in Queensland for two years now. We've more than enough tradies to take up that slack.

Vorsprung

Can't find figures on it, but I've read in the past that China buys up a lot of the mining output, and that they're in a big bubble of their own.

Not sure if China going bust = Australia getting into trouble.

Mellor

I'm no expert, but it's quite obvious they you're not an expert.
Furthermore, in my expert opinion, the two are both simialr and different, but hey what do I know.

padrepio

Similarities

complicit media - check - anyone can see for themselves the oversized property supplements in the Sydney Morning Herald - the channel 7/channel 9 reports on auctions etc

Surge in immigration - check - while the surf, sun lifestyle is great the majority of recent immigrants are here for work first and foremost. The domestic birth rate is very low so low in fact that the govt is actually paying you to have kids. Make no mistake lying on the beach wont pay wages and if the economy collapsed the vast majority of immigrants would leave.

Use of immigration to justify housing boom - check - every TV report on auctions mentions immigrants (Asians generally) bidding

weak willed politican - check - I would be a lot happier if Rudd was still in charge. His super resources tax would have weaned Oz some bit off the dependence on the mining sector. Gillard got in with her union buddies naturally the tax was changed significantly. I cant see her standing up to big business at all ala Bertie.

obsession with property - check - every guy I work with owns property with huge mortgages. Guy came to change my boiler the other week was on about buying his second with a pool and renting out the one he just bought. Make no mistake property is seen as a safe investment here by the locals and every tom dick and harry considers themselves a property developer.

differences

Aussie boom is export led at least though if China's bubble bursts that will collapse. Great thing about resources is they can always dig them up again at a later date. Ireland never exported anything really during the boom years.

Sydney at least there is a huge shortage of quality rental accomodation at present. There is literally no competition for landlords who can rent out crap places easily particularly in areas close to the city and the beaches. Sydney and other cities could always offer tax incentives for investors to do up their property down the road.

The national broadband network is in theory* a great infrastructure project and will send the IT industry here into overdrive. (It is in good shape anyway). It is good for Oz though as it has the potential to create lots of IT related industry. Again will weaken the dependency away from mining

The geography of Oz is far different than Ireland naturally. Oz is bigger than Europe but the population is pretty much condensed to the cities. Developers arent suddenly going to start building huge housing estates in provincial towns like Ireland as noone will want to live there.

The banks are supposedly well regulated. They went through their own collapse in the 1980s and there arent 100% mortgages or anything like it. Thankfully interest rates went up recently. People are still getting mortgages though which is a worry.

There is no crazy benchmarking for public sector workers. Teachers, nurses etc arent paid that great here. Social welfare is by all accounts tough to get here too.

Also Aus has control of its own currency so a lot of options open to it unlike Ireland if things go south.


All in all, I can only see things getting better here for the economy in the short term. There is scope for the mining boom to get bigger and construction itself to increase through incentives. However the dependency on China long term is worrying and Aus will have to more than a global quarry to avoid a crash down the road I reckon.

FreeAnd..

its the same same but different...exactly the same way ireland and the US were the same same but completely different...

Aus did a great job of can kicking but the similarities in attitudes to debt are overwhelming...and a denial that it is a problem (oh and the fact that they are different - just like ireland was back in the day...)

have a read of this for a more detailed insight http://www.thepropertypin.com/viewtopic.php?f=11&t=26758&hilit=ominous

Zambia

Well there is nowhere left to run really is there...

If it hits it hits

jackbhoy

brendansmith wrote: »

I love lamp!

My point was to even someone like me, with no background in economics, Australia is a very different case to Ireland and I gave a couple of obvious examples of why that's my opinion.

I wasn't taking piss out of op with first line either, it was meant to be self-deprecating in that we were all obsessed with talking about property during the boom but now weve moved on to economics and recession.

Touchy bunch in here, aren't we

Zambia

Hey .... less of the inclusive phrases

raymann

interesting hearing the responses. after watching the whole financial system almost collapse because of a global obsession with rising house prices back in 08, im left with a bad feeling when i read that aus now has the worlds most expensive house prices.

people are buying investment properties with negative yields. immigration is the reason it will never end apparently. remember that one?

chinese demand for their exports is also held up as well. when i give even a closer look into china i see stuff like this:

http://www.businessinsider.com/pictures-chinese-ghost-cities-2010-12

but mostly, fundamentally, i still cant see the advantage of having an economy where its expensive to visit, to live and to set up businesses. is this type of economy not been proved to be fundamentally flawed over the last ten years, ireland spain us etc. or will aus buck the trend?

jackbhoy

raymann wrote: »

but mostly, fundamentally, i still cant see the advantage of having an economy where its expensive to visit, to live and to set up businesses. is this type of economy not been proved to be fundamentally flawed over the last ten years, ireland spain us etc. or will aus buck the trend?

I think the original question was is it another Ireland and I don't think it is. You are more than likely correct that there will be some sort of slump but very hard to see same decline as here. Aussies also have control of their own interest rates and currency which was another factor here. Id also assume their banks are not in same horrendous state as ours and if they are I doubt their government would take on problem like ours did.

Jumpy

Zambia wrote: »

Hey .... less of the inclusive phrases

Ooooh touchy.

ballooba

padrepio wrote: »

Aussie boom is export led at least...

Doesn't Australia run a pretty consistent trade deficit?

sanbrafyffe

how in earth would australia ever go as bad as ireland when they treasure wats theirs and make the most of it and also get the best value for it(eg).oil,gas,gold,coal,copper to name a few commodities.we just gave ours to british and american companies for nothing.spot the paddy easily.well done bertie and fianna fail

raymann

sanbrafyffe wrote: »

how in earth would australia ever go as bad as ireland when they treasure wats theirs and make the most of it and also get the best value for it(eg).oil,gas,gold,coal,copper to name a few commodities.we just gave ours to british and american companies for nothing.spot the paddy easily.well done bertie and fianna fail

what are you on about? are you talking about corrib? there is plenty of other threads for that and to be honest everything ive seen makes it all look like a pretty standard deal for unproven reserves.

mel.b

I'm an Aussie who has been living in Ireland for just over 3 years now. I can see the similarities between where Ireland was and where Australia is now. There is a lot of data coming ot of Oz at the moment that retail is softening, which reminds me a lot of ireland at Christmas 2007. The number of mortages being issued is apparenty dropping and the number of real estate listings is increasing. The floods & cyclone in QLD & floods in Victoria are going to have a significant impact on the economy and negative growth in at least the next quarter is expected.

A previous poster mentioned that they are not building huge housing estates in regional areas. When i was home in November i did notice new estates being built in several small rural towns that would offer little employment. One is at least a 1 - 1.5 hr commute to Melbourne in peak hour traffic. The other is at least 2hours to Melb on a Sunday with no traffic. It is about 25min to a regional centre that has its prime industry in coal/electricity.

While Ireland has its (significant)problems, Australia has to be one of the biggest rip off countries. I pay €20 / month for 20G of mobile broadband. With Telstra mobile broadband, the biggest plan you can get is 12G which costs a whopping $69.99 (€52) and that's only if you have a fixed line and another service with them. If you don't you're up for $89.99 (€67)!! Optus may be slightly better value with $59.99 for between 10 - 20G depending on peak / off peak usage. Mobile phones are the same. On a Telstra $49 plan they charge you 37c for the privledge of connecting the call and then it is 80c per minute. To retreive your voicemail it's 30c per 30sec. Text messages are 25c for a standard message and 50c for an international text. With vodafone i currently pay 15c for international texts and calls to international landlines and calls are 25c per minute. Not to mention the monthly bank fees then fees for excess transactons (when i was in oz i had an account with anz that for $5 p/month you got unlimited transactions) charges of $2+ for checking your balance
or withdrawing cash from another banks ATM (and if you do both ypu are stung twice!) and a 'service charge' of $2+ for every bill you pay via bpay or at the post office.

Ok, rant over:o. But seriously, yes i do see the similarities between the two countries.

accaguest

[Interesting thread, I'll have a bit of a rant]

Yes, I've been noticing the similarities aswell. It's very similar to where Ireland was just at the peak where technically everyone's loaded but in reality they're at their most susceptible.

And the debt/hire purchase culture - wow, I see 60 months interest free for things like Tvs. Scary.

Its obviously got a much brighter future than we have and its natural resources, scale of geography and location mean in one way they're not comparable but I can't shake the feeling they're fairly burning through the money. While they will have a longer period of prosperity, it won't be as long as it could and should be.

I heard a quote the other day from, I think, Gillard (and their political class are at least as bad as ours imo, maybe worse) in response to the flood levy where she said Australia can 'pay as we go' which sounded absolutely crazy. No focus on value for money just 'don't worry, we're loaded'. Outrageous. maybe before I would have found this Aussie honesty refreshing but now it just seems ignorant and lazy.

There's obviously much harder financial data around to suggest Oz is still strengthening, look at how strong the $ is, but on a personal level I don't like how money orientated the whole place is now. I was here in '06 and I felt it was much more different but that could just be me. Maybe it's good that the minimum wage is $19 (14 euro!!) and it can mean that the working class can enjoy an unrivaled standard of living but surely it's just excessive now. How can a base rate need to be so high. Half the world's starving and money's being utterly wasted here on a massive scale on all sorts of crap. It's immoral.

I can't shake the feeling that the Aussies have lost a bit of their drive and determination and have become a bit smug and self-satisfied. A stupid analogy but look at their sports stars - they've probably never been so poor and nobody's really that bothered. They used to put a lot of stock into how they were represented on a world stage but now...

They're obsessed with feeling superior to the English as well, the same colonial hang-ups we had during the Celtic Tiger. Bit pathetic really, especially when this place will just turn into some non-country if it carries on like this imo, where the only thing people have in common is that everybody likes Apple products.

They still haven't produced any good music or culture of note while the Uk is constantly pushing things forward so I don't know where they're getting that superior attitude from anyway. It's turning into "I can't help but notice I'm considerably richer than you". Boring as F**k.

Rant over.

Doc

There are a couple of differences in how housing is built here that should also be taken into account.
In Ireland a developer would by a large site and build the same house over and over again and then sell them at a profit to the public. Most new houses built here are not done like that. A person tends to buy the land first and then build there house. True there are areas where you buy from a developer who then builds you’re house but the house is only built when there is a buyer there for it already.
House prices are rising but one thing you won’t get here that you have now at home even if they do fall is the ghost estates that are in Ireland. I think it is the lack of housing that is pushing up the price here and the use of land. I live in a suburb on the edge of Melbourne CBD and I am amazed at the fact that there are so many bungalows with gardens in my area. If it was Dublin these would all be two story terest houses or a developer would have bought the house and put flats on it.
When a house comes on the market near the city there is always high demand for them. Currently I can’t see a reason why there would be a dramatic drop in house prices.

ballooba

accaguest wrote: »

There's obviously much harder financial data around to suggest Oz is still strengthening, look at how strong the $ is, but on a personal level I don't like how money orientated the whole place is now.

The strong AUD is not an indicator for me of anything other than high interest rates. It's not that positive for the economy either, it hurts export industry and encourages imports. If the AUD were weaker then the mineral exports might be of more benefit and Australia could pay it's way instead of living off credit.

jank

ballooba wrote: »

The strong AUD is not an indicator for me of anything other than high interest rates. It's not that positive for the economy either, it hurts export industry and encourages imports. If the AUD were weaker then the mineral exports might be of more benefit and Australia could pay it's way instead of living off credit.

It is also an indicator of a commodity backed currency. The are fears over the greenback and the euro and investors are buying up $hit loads of Aussie $'s just incase..

It does hurt the economy but great for the consumer though.:D

jank

Vorsprung wrote: »

Can't find figures on it, but I've read in the past that China buys up a lot of the mining output, and that they're in a big bubble of their own.

Not sure if China going bust = Australia getting into trouble.

I see this line over and over again. If China goes down the toilet we have a lot more to worry about than the Australian economy.

ballooba

Doc wrote: »

I think it is the lack of housing that is pushing up the price here and the use of land.

If there's one thing that Australia doesn't have, it's a lack of housing. They're talking about the rise of the single person household to justify the incredible underutilisation and there are vast swathes of 'holiday homes' like we had in Ireland.

Jumpy

ballooba wrote: »

If there's one thing that Australia doesn't have, it's a lack of housing. They're talking about the rise of the single person household to justify the incredible underutilisation and there are vast swathes of 'holiday homes' like we had in Ireland.

But in the major cities there is currently a huge requirement for housing.
Sydney has a major lack of housing at present.

old_aussie

What are you going on about OP, the inflation rate in Australia is 2.65%

Yeah, don't come here and drag Australia down like Ireland, with the Irish attitude that if times get a bit tough just move somewhere else.

http://www.rateinflation.com/inflation-rate/australia-inflation-rate.php

ballooba

Jumpy wrote: »

But in the major cities there is currently a huge requirement for housing.
Sydney has a major lack of housing at present.

That's a topic of considerable debate. It's certainly not clear and is definitely played up by the real estate industry. Excess of credit is certainly more likely than shortage of property.

Mahatma coat

A LOT of the construction work being carried out at the moment is Government Funded, whats New is the Levels of Destruction this time, there will be a decent growth in constructin in a few months here, especially in Renovation, which may alieveate the situation somewhat, but if the People cant afford to Pay, then :eek:

mikom

old_aussie wrote: »

Yeah, don't come here and drag Australia down like Ireland, with the Irish attitude that if times get a bit tough just move somewhere else.

Yep, that's why we left dear old Ireland to the English when things got tough......

mel.b

Doc wrote: »

There are a couple of differences in how housing is built here that should also be taken into account.
In Ireland a developer would by a large site and build the same house over and over again and then sell them at a profit to the public. Most new houses built here are not done like that. A person tends to buy the land first and then build there house. True there are areas where you buy from a developer who then builds you’re house but the house is only built when there is a buyer there for it already.
House prices are rising but one thing you won’t get here that you have now at home even if they do fall is the ghost estates that are in Ireland. I think it is the lack of housing that is pushing up the price here and the use of land. I live in a suburb on the edge of Melbourne CBD and I am amazed at the fact that there are so many bungalows with gardens in my area. If it was Dublin these would all be two story terest houses or a developer would have bought the house and put flats on it.
When a house comes on the market near the city there is always high demand
for them. Currently I can’t see a reason why there would be a dramatic drop
in house prices.

While i agree that the majority of house building is done differently in Oz (house and land purchased as you mentioned) i am starting to see a shift towards developments more like ireland. In my home town, 100km from Melb, there is an 'estate' being built of at least 20 units and none of these were sold before they were built ( and the great majority are still sitting unsold, although they are not finished yet) and there at least 13 one off houses for sale that have been built without a buyer first.

Mahatma coat

thats the thing tho, Location Location Locartion

For $100K you could get a fair lot 'Land' in the outback, or a tiny parcel Near a city, most Aussies want to live near the cities, hence the artificial scarcity of an abundant resoursce.

ballooba

Mahatma coat wrote: »

thats the thing tho, Location Location Locartion

For $100K you could get a fair lot 'Land' in the outback, or a tiny parcel Near a city, most Aussies want to live near the cities, hence the artificial scarcity of an abundant resoursce.

Have you been reading the CommBank presentation?
http://www.commbank.com.au/about-us/shareholders/pdfs/2010-asx/Australian_Residential_Housing_and_Mortgages_slide_pack_9_Sept_2010.pdf
http://www.smh.com.au/business/cba-raises-eyebrows-on-global-roadshow-20100914-15avx.html
http://www.abc.net.au/news/stories/2010/09/24/3021480.htm
http://www.henrythornton.com/article.asp?article_id=6153
http://www.moneymorning.com.au/20100910/has-commonwealth-bank-deliberately-misled-investors.html
http://www.moneymorning.com.au/20100913/what-does-the-commonwealth-bank-have-to-hide.html

mandrake04

^ Eddie Hobbs

raymann

old_aussie wrote: »

What are you going on about OP, the inflation rate in Australia is 2.65%

Yeah, don't come here and drag Australia down like Ireland, with the Irish attitude that if times get a bit tough just move somewhere else.

http://www.rateinflation.com/inflation-rate/australia-inflation-rate.php

god, im having full on 06 flashbacks. i remember being sat there in the middle of the celtic tiger with prices for everything just rocketing and people on the news saying, inflation is at a record low.....

it just seems like all the same mistakes that ireland made. over reliance on property, check, crazy banks, check, politicians egging it on, check. if it does burst then you end up with exactly the same as ireland, a super expensive, uncompetitive, indebted economy with busted banks.

ballooba

raymann wrote: »

god, im having full on 06 flashbacks. i remember being sat there in the middle of the celtic tiger with prices for everything just rocketing and people on the news saying, inflation is at a record low.....

Yep, there was commentary in recent weeks that the measure of inflation used does not accurately reflect household costs. It excludes food an energy for instance.

Diamondmaker

I agree with similarities and have "felt" many similar indicators over my last 3 plus years here.

Im in the construction sector and have experienced rocketing salaries purely due to a lack of decent bodies to work.

Housing is now unaffordable to the average punter in the area that suits where they would like to live or near work.

Immigration driving up house prices and rental demands

There is a huge obsession with 2nd and 3rd home and investment properties. I know many people with investment properties and they are all losing money on them. This is not an issue so long as you can service this debt and this is not a major problem right now, should unemployment take further increases many leveraged people will have to panic sell causing possible bubble bursting.

Developers and economists are talking of a "levelling" of prices not a crash...hmmmm

Record bank profits

Constantly rising inflation

Over dependence on 1 or 2 sectors. Dont forget it only takes mineral inflation to go so far and Canada or another country can steal all the business or China can just pop itself. Its gonna happen sooner or later.

Average guy in the vox pop whinging they cant afford basic household requirements.

Not an analysis just purely a few observations and I regulalry feel things are like 06 at home and Im just sort of lookin in from some where else while many around me spend like there is no tomorrow.

I have no vested interest in things going wrong as a PR it would only harm me but I really cant help the feeling.

raymann

im really starting to think this is the case now. this isnt how you run a successful economy long term. its how you drive one into the ground.

FreeAnd..

Pretty comprehensive overview...http://www.nakedcapitalism.com/2011/02/deep-t-australian-banking-system-on-unstoppable-path-to-collapse-or-government-bailout.html

Deep T: Australian Banking System on Unstoppable Path to Collapse or Government Bailout

Yves here. This long and informative post on the pending train wreck in the Australian financial system might seem to be too narrow a topic for most Naked Capitalism readers, but it makes for an important object lesson. Australia managed to come out of the global financial crisis largely unscathed because its banks did not swill down toxic assets from the US (chump quasi retail investors were another matter) and it benefitted from the commodities boom.

Nevertheless, one might think its bank regulators might see what happened abroad as a cautionary tale. Mortgage debt took center stage in the crisis, and Australia is in the throes of a serious housing bubble. Yet as this post describes, the regulators seem asleep at the switch as to one of its major drivers.

...
...

raymann

this doesnt bode well for australia:

http://video.ft.com/v/772837551001/Why-Jim-Chanos-is-short-China