Australia headed for ‘economic armageddon’

 

Australia headed for ‘economic armageddon’

 

Joe Hildebrand

AUSTRALIA is headed for an “economic Armageddon”, with record household debt, record foreign debt and a massive housing bubble creating a perfect storm that could “wipe out” millions of families if there is a global shock.

That is the apocalyptic warning of a former government economic advisor, who says the government needs to cut tax incentives such as negative gearing and welfare handouts and the RBA needs to increase interest rates in order to avoid a “devastating depression”.

Corporate governance specialist John Adams, who was an economics and policy advisor to Senator Arthur Sinodinos and management consultant to a big four accounting firm, believes he has found seven disturbing signs that the global economy is primed for a major fall.

Worse still, Australia is particularly vulnerable because of significant structural imbalances, including record levels of household debt not seen since the lead up to the last great depression in the 1920s.

“Australians should be concerned over the state of both the Australian and global economy,” Mr Adams told news.com.au.

“The data clearly demonstrates that there are significant structural economic imbalances in the Australian economy. Significant expansion of the broad money supply and record low interest rates by the Reserve Bank of Australia as well as generous tax incentives and welfare provisions by the Federal Government have led Australians to amass record levels of personal debt which have fuelled the creation of asset bubbles, particularly in housing.

“Millions of Australians are not only doing it tough through significant cost of living and debt serving pressures, but are at significant risk of being financially wiped out if an unanticipated adverse international economic shock were to hit Australia such as a new global financial crisis.”

Mr Adams called on the RBA to take pre-emptive action by raising interest rates and said the government needed to rein in tax breaks like negative gearing as well as welfare payments.

This, he admitted, would result in “a mild controlled economic recession” but would stave off “uncontrolled devastating depression”.

But hey, it’s the apocalypse we’re talking about, so don’t take my word for it. Here is John Adams’ full analysis in words and pictures, which he calls….

Seven Signs Australians Are Facing Economic Armageddon

Sign 1: Record Australian Household Debt

According to the Reserve Bank of Australia, Australia’s household debt as a proportion of disposable income now stands at a record high of 187%.

The two closest episodes were the 1880s and the 1920s, which both preceded the only two economic depressions ever experienced in Australian history in 1890 and 1929….more here

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