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Wednesday, September 01, 2004As discussed earlier, the economic gain in Australia has been for the few. Now let us see what has happened to the abilities for households to save over the last 30 years. The ability to save has been fairly static until wait for it - 1996! In fact since February 2002, the savings have plunged into negative territory, meaning people are either spending their savings, or relying on debt to consume. As at January 2001, this shortfall was a massive $4bn. So the Howard government can easily claim by a very long margin the worst record in savings in the last 30 years.
In fact the data from Economagic shows that not since the records began in 1959 has Australia been in a worse position. The government is right to say that people are concerned about interest rates, as a small rise on such a low rate could have catastrophic effects. If the government can claim responsibility for low interest rates (dubious at the best of times), it must also claim responsibility for the debt that has been incurred to maintain a standard of living. Can you see the cycle? Low interest rates -> more borrowing -> debt funded economic gains -> which go to the top end of town -> people fall behind due to CPI of basic items (food has shot up quicker than combined CPI) keeping ahead of wage increases -> more debt -> etc. This cannot be sustained, has been managed on a social level totally irresponsibly by Howard and Costello, and will result in a mother of all "corrections" one day.