Wednesday 14th December 2016 - 7:35 pm

The big squeeze:it’s at your doorstep

by Alan Thornhill

Many Australians had their first glimpse of new threats to their financial independence and comfort today.

 

That happened when the Federal Treasurer Scott Morrison sought to explain the differences between good and bad debt, in a speech he gave in Sydney.

 

But “glimpse”?

 

Surely the people taking out these loans knew both the risks, as well as the rewards that go with them.

 

Yes, they did.

 

But for some years now, the rewards, not the risks, have dominated the thinking of Australian investors.

 

Or might we say speculators?

 

They have used debt vigorously to build their wealth both in middle age, when they took advantage of negative gearing, to acquire not one, but several homes.

 

And feathering their nests, with borrowed money, in retirement.

 

The incentives, behind all this, changed suddenly when major international ratings agencies called, saying Australia’s triple-A credit rating would be cut, if it didn’t get its debts under control soon.

 

All this became more urgent,  as Australia’s banks were squeezed, and may have to raise their own rates soon, to cope with the new outlook.

 

Guess who gets squeezed, then?


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Alan Thornhill

Alan Thornhill is a parliamentary press gallery journalist.
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