the aussie wet dream is coming

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    Australian dream gets alarm call
    By Tim Colebatch
    Economics Editor
    Canberra
    December 4, 2004


    Fewer Australians now own their own homes, and the proportion of households renting on the market has shot up from 18 per cent to 22 per cent in recent years as house prices have soared, new statistics show.

    The figures coincide with a warning from Australian National University economist Ross Garnaut that Australia risks being pitched into recession by global financial markets unless the Federal Government and Reserve Bank act quickly to bring our debt-fuelled spending binge to an end.

    Professor Garnaut, former adviser to Labor Prime Minister Bob Hawke, said the economy had entered "a period of vulnerability" due to excessively loose fiscal and monetary policies, with unpredictable consequences if global markets turned on the Australian dollar.

    He said any downturn could be most severe in Sydney and Melbourne as unsustainable housing prices and consumer spending fall. He urged the Government to move fast to cut its own spending, substantially lift its surplus and speed up productivity reforms.

    His warning came as the Bureau of Statistics reported that in the two years to June 2003, the number of households owning their own homes rose by just 3 per cent, while the number renting on the private market shot up by 9 per cent.

    In the first seven years of the Howard Government, the figures show, the number of home owners rose 13 per cent and the number in private rental accommodation rose 33 per cent.

    Just as striking is the shift among home owners. As household equity loans have spread, the number of households with a fully owned home has shrunk by 2.5 per cent since 1996, while the number paying off mortgages has jumped 36 per cent.

    The bureau figures show little change in the distribution of household income since 2000, in contrast to the late '90s, when people on high incomes increased their share at the expense of people on low and middle incomes.

    Australia's economy was vulnerable due to loose fiscal and monetary policies.
    ROSS GARNAUT, ANU They also show that the proportion of the population on welfare is declining. In 2002-03, 26.6 per cent of households said most of their income came from welfare benefits, down from 28.7 per cent three years earlier.

    Canberra remains Australia's richest city, with an average income of $642 per head, followed by Darwin ($575), Sydney ($574) and Melbourne ($541). Incomes were lowest in rural Tasmania at $424 per head.

    Real disposable incomes rose 4.8 per cent over the two years to June 2003, after taking out taxes, inflation and interest bills. But real household consumption rose 7.2 per cent, as households financed more of their spending from debt.

    Giving the Sir Leslie Melville lecture at the ANU, Professor Garnaut said the spending boom and loose policies had "raised expenditures and relative costs to levels that will be sustainable only in the most favourable circumstances".

    He said the current level of commodity export prices was unlikely to be sustained, while rising global interest rates would lift the cost of servicing Australia's debt, putting "immense downward pressure on the Australian dollar".
 
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