Blindsided on a Tuesday

Blindsided on a Tuesday
  • In debt we’re stuck
  • What’s really behind ‘today’s’ headlines
  • Sell Australia — protecting yourself from what’s to come

Australia is the economy that just keeps giving.

No matter what has happened in the global economy, Australia has just kept growing.

I like to call it the Teflon economy. Because nothing sticks to us.

But what if that is all over?

What if the dream run of nearly three decades of continuous good times is finished?

What if we really are about to be blindsided on a Tuesday?

And more importantly, what will you do?

In debt we’re stuck

3 in 5 Aussies won’t be able to cut back on debts’, revealed a recent poll by research firm EY.

In fact, in 2018, 60% of people said they wanted to reduce their debts. Come this year, that figure has dropped to 28%.

It’s not because they don’t want to. It’s simply because they can’t.

And it’s not just low-income earners, either.

High-income earners — those earning more than $150,000 per year — are in the same spot of trouble.

Last year, 73% of this group said they were aiming to pay off debt. A year on, that number has dropped to 37%.

Not only are our intentions to pay off debt weakening, more of us are falling behind on our mortgage repayments.

S&P Global Director Erin Kitson recently mentioned that mortgage payments more than 90 days late were increasing.[1]

Another research firm, Moody’s, said the number of Aussies 30 days behind on their arrears jumped 1.58% for November 2018.

Shaw and Partners Senior Banking Analyst Brett Le Mesurier says he expects falling house prices to increase mortgage defaults.

Last Friday, a report from ABC News said nationwide mortgage defaults were at ‘the highest they’ve been in two decades.[2]

And rounding out all of this is the latest data dump from Digital Finance Analytics.

Just yesterday, their data showed that 66,700 Australian households are in danger of falling into a 30-day default on their home loan within the next 12 months. This compares to just 800 households for the previous month.

A 30-day mortgage arrears isn’t a huge deal for banks. Most banks will attempt to work with debtors in this period, rather than let them default.

However, Digital Finance Analytics Principal Martin North says it’s a telling indicator.

North says more people falling into this category is critical indicator of household cash flow.[3]

Or in this case, the lack of it.

In other words, the more people falling a month behind on mortgage payments, the greater the indicator of financial struggles faced by Aussie households.

What’s really behind ‘today’s’ headlines

Of course, being trapped in our massive debt cave is just the story the mainstream are running with today.

Yesterday, the big story was that Chinese investment in Australia plunged 36% in 2018. China may have reduced spending here, but its overall global investment grew by 4.2% over the same period.

In other words, our biggest trading partner is shopping elsewhere.

Of course, the big story before that was the Aussie budget.

Last week, we all heard about how both sides of government will introduce ill-conceived incentives to ‘boost’ spending for the average Aussie.

Oh, and if we go back a month, to the start of March, the hot topic was the coming interest rate cut from the Reserve Bank of Australia. Our central bank is finally acknowledging the lack of consumer spending and wage growth.

The point is, today is a day of connecting the dots.

Just because today’s ‘big news’ is household mortgage stress, doesn’t make it big news.

It’s only part of the picture.

Over the past two weeks, I’ve been trying to show you how all of these seemingly unconnected events are actually highly connected.

What the weak economic growth and central bank rate cuts mean for you.

How falling property prices and higher mortgage defaults will disrupt Australia’s national income.

Why people taking out fewer personal loans and spending less is bad news for business.

That our location in the Southern Hemisphere doesn’t insulate us from a business going bankrupt in, say, India.

How a loan default in Switzerland could send the Aussie economy careening into a brick wall.

And the fact that our biggest trading partner is drastically reducing how much money it spends here.

All of the above is part of a complex financial web.

I draw the line between all of these dots here .

Until next time,

Shae Russell,
Editor, The Daily Reckoning Australia

PS: Don’t miss out on my short video series, which you can find here . As of this morning, 13,113 people have tuned in to hear my timely warning on not only what has happened to the Australian economy…but what’s ahead for everyday Aussies. It’s all part of my ‘Sell Australia’ strategy, which shows the steps you can take to protect yourself from the fallout.