IS THE GREAT AUSTRALIAN DREAM FINALLY DEAD!!!!!!!!

Cheers Marc, I agree. In life I'm actually a very upbeat person who looks forward to embracing the future with all its challenges. I also suspect that natural and economic forces (energy/resource scarcity and the consequences of overindebtedness among others) might in the future actually bring societal trends and focus back to things that are really important; family and personal wellbeing for example, rather than more, bigger, mine, faster, shinier, gimme, outofmyway, lookatmelookatmelookatMEEEEEE!

People, not stuff. Us, not me versus them. Our lives, not my life. Living life, not simply consuming it.

Perhaps I’m just overly-optimistic!

As long as the other way is towards disagreement, not hating my posts. Healthy debate needs people who hold strong opposing beliefs.

On the matter of comparing Australia and the US, I think we're starting to set trends, not follow them. The chart below show household debt in Aus vs US. A similar thing can be seen in our national savings rate which went negative well before the US’ did.

Courtesy of Steve Keen (http://www.debtdeflation.com/blogs/)

No argument there. You have to admit though that at some point, debt to income or debt servicing costs must level off. There is a ceiling beyond which debt cannot continue to grow faster than incomes? If so, is not the simple implication is that at some point in the future, house price growth will be limited to the rate of income growth?

On attitude: Is there a possibility that debt might in the future be considered something to be avoided rather than embraced? Again, I think of my grandparents who were raised in a time where they could see the outcome of their parents generation's profligate spending and spendthrift attitudes to debt.

I already see a change in many of my friends who in their mid 20s to mid 30s have set aside the dream of owning a half-decent home. Some of them are the thriftiest people I've ever known, managing to live busy and fun lives while saving large portions of their wage. The number of my close friends who have saved over $100,000 cash (plus share/managed fund investments) on fairly ordinary incomes can't be counted on one hand. A couple have multiples of that amount.

A number of them (including myself) don't have credit cards or any debt at all. Keep an eye out for the trend among trendy GenX/Ys towards not wearing brands, not enslaving themselves to mobile phones or isolating themselves between earplugs. Perhaps this is the beginning of a new mindset? Choose your own path (ala The Barefoot Investor)? Attitudes change. A changing attitude to debt (perhaps enforced by economic reality) could be powerful enough to remove the speculative premium currently existing in house prices.

Make no mistake, the economy is only strong because of the amount of debt we are taking on! If the rate of debt growth (which currently contributes a record >15% to demand) were to fall to sustainable levels (roughly half), we would be in recession already. We are effectively trying to borrow our way to prosperity!

Households are already paying a far higher percentage of their income to the bank in interest than ever before! And then theres:

• 12.5%—The amount by which bankruptcies had increased in the 9 months to March.
• 51.6%—The proportion of people surveyed by the financial advisory firm, iPac, who report feeling secure in their finances, the lowest reading since the series began in March 2005.
• 32%—The growth in debt agreements, which offer the chance to consolidate debts to avoid bankruptcy, in the 9 months to March 2007.
• 1984—The year when housing affordability was last this low.
• 30,000—The current number of bankruptcies per year.
• 2720—The number of claims for the repossession of land lodged with the Supreme Court of Victoria over the year to April, the highest for 6 years.
• 12%—The proportion of household disposable income used to meet interest repayments (note: this is just only the interest payment, not including the principal!).
• 14.2%—The percentage of sub-prime securitised loans that are in arrears for 30 days or more, the highest since December 2000.

Source: http://www.theage.com.au/media/2007/06/01/1180205514673.html

None of which makes me think that households are in a position to borrow considerably more money. They indicate to me that people are struggling already despite the apparently booming economy. Goodness knows how they'll go when the (inevitable) recession occurs! Further evidence for this is the populace's apparent intention to oust the government later in the year. If people see a booming economy, they certainly don’t feel that they’re getting part of the pie.

Cheers, F. [cowboy2]

Acknowledging current challenges is one thing. The ability to moan with your head in the sand is another. The same ignorance that leads to many views and comments, is too often the very thing that maintains a persons inability to innovate. Educating yourself financially is the only sure way out of this.

To remove negative gearing, you remove rental properties. This creates an even higher demand for housing. If you make the effort to learn a market, you can always buy below value. If you make the effort to learn about mortgages, you can always find a way to have your house pay for at least half of it's cost, sometimes all of it.

I hear people say 'Don't buy now, it's booming and the market's inflated', others will say 'Don't buy now, property is going backward'. Ten years later, you'll hear them all say 'I wish I'd bought ten years ago'.

The next ten years will pass us by anyway. In ten years, will you be proud of the way you've innovated and the future you've created? Or, will you be proud of the myriad of excuses you've developed and social circle you've maintained that justify ignorant logic?

Have you got the message yet Pete?

Good to see Pete has weighed back in, and is taking some action and has benefitted from the considerable advice proffered.

I'm 35, and felt just the same a year or 2 out of Uni.  I know myself, I was used to getting good things pretty easily: a Uni degree, overseas travel: left Uni with credit card debt ad Hecs debt.

I've invested in real estate, always borrowing to my limit, often using credit cards to complete steps, gearing very heavily and carrying lots of debt (more than anyone I know).  Over the next year I'm hoping it will pay off as I complete a rural subdivision.  I'm hoping to pay off my home and purchase another, larger rural block.

I add my story not to say "look how easy it is" but rather to put these points forward:
1. I looked and looked for something I could afford: Eventually bought a 8acre bush block in a rural subdivision area (1 acre blocks) for 50k: less than the 1 acre blocks.  I found it by walking 10k from town out to the subdivision: had I driven I would have missed it because it was so overgrowth with weeds.  I've yet to see a cheaper block in the region I live in (Cairns).  It really was an ugly duckling.  I have worked incredibly hard on the block to improve it over the last 5 years.

2.  I've had to curtail my lifestyle a fair bit, but I must admit I'm hopeless at tightening my belt and continually struggle with credit card debt etc: I just haven't developed a frugal attitude/lifestyle: I guess like Pete I think lifes for living.  I really believe we aren't as tough as previous generations: I know I've had an easy life and glad of it.  Having said that, often the experiences, the travel, the education, the technology pay off to improve our sophistication as workers/investors/creative thinkers.  Being frugal is really great, but sometimes, in the world we live in, its not the best way: it may be part of your strategy but its not a complete strategy, it has to be balanced with proactive actions like hunting for deals or using leverage.

3.  In my situation, I've only kept moving forward rather than going broke through steady price growth in my region.  I had some tough times initially where I would spend money on construction on a vacant block, to find the improved block wasn't worth what I spent on it.  I did most of the work myself on a budget, and perhaps I would have been better (or worse) off employing a builder.  I have to be realistic: its only price inflation of the real estate I'd bought that kept me bouyant (because I'd started with no savings and $35k income, and debt).  In a declining market, I would have had to abort, or even gone bankrupt.  looking back, I see myself as impatient, greedy and reckless.  It looks like it should pay off.

Reading Petes original Post, its clear to me now how I wanted things now!  I could see (from media and sites like this) that a boom was coming and I needed to get on the train or miss out. I was impatient and greedy, but with good reason.  I've now got tonnes more debt, but two great properties and an exit strategy which should leave me in a good position.  I got close enough to bankruptcy to realise in slightly different circumstances how easy it is to fail when the boom-tide changes unexpectedly

I know a lot of my generation wants the nice house in the nice suburb straight out of Uni.  Clearly, it wouldn't kill them to save for a few years, do it tough for a while, go without etc.  They are hard things to hear, with the impatience and impetuousness of youth: I'm sure human nature hasn't changed.

My advice: keep looking for the deal or the ethical method that will build your wealth.  Don't be afraid to take baby steps: as people have said, its all good education.  I spent 6 months solidly researching and hunting before I bought my first place, and years since learning more.  There are opportunities out there: they take time and money, but you have both, and plenty more to come.

Good luck if you do decide to push the envelope and improve your circumstances.  The anger you feel is felt by many: it sounds like you will be one of those who uses it to change their situation rather than let it defeat them.

We need that sort of discomfort to motivate us to improve our lot.

Peter – If you were my child I would slap you for taking that attitude!!!!  Why??  Because my son is 21, an apprentice who earns considerably less than a uni graduate does, and actually has planned for his futute rather than just hoping that we dont reverse mortgage the family home so we can buy Harleys and ride through the swiss Alps until there is no equity left!  He has knuckled down while living at home, still drives the same $500 car he bought when he got his learners at 16, and takes jam sandwiches to work for lunch.  He  also bought his first investment property last year, which he plans to pay off as quickly as possible; hopefully will add another 1 or 2 in the next few years, and then at a time in the future that suits, will sell to realise the gain and use this for his first home.  Other than the fact he has a penchant for purple mohawks and loud guitars, he is obviously one of the growing number of young people who have realised that life will not be handed to them on a platter, and have taken steps to insure their futures.  This will obviously not apply to you, as injecting ice users have limited tenure on this planet, so I suggest you change your attitude, and when you realise that the world doesnt owe you a living, you can take that first step to secure your own financial future rather than waiting for your parents to drop dead!!  (and by the way, its not the kids inheritance until we decide it is….it is our hard earned money and we will spend it as we see fit)

You want angry????? Im angry!!!!!!!!!