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  1. #1
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    Default Consumer Confidence Low?

    Over the last 12-24 months or so I've been watching the Australian and international economies and markets with interest and am more and more convinced that we are fast approaching some very unstable, possibly distressing and troubling times.

    In Australia we have a huge private debt bubble, built by pushing our housing market to near world-record prices as well as spending beyond our means on anything and everything for the better part of two decades.

    In the last 12 months I am getting the sense that this time of debt-fueled prosperity is perhaps coming to an end.

    Rather than the news headlines, political commentary or "official" economic data, which generally paints a fairly positive picture or puts a positive spin on things, it's the little things I'm seeing that make me worried that things are worse than they appear on the surface. To tie-into woodworking, I'm noticing more sales, more frequently. A reduction in the price of a lot of products. Tools that would normally be snapped up on the second hand market, even on this forum, sitting longer and discounted more heavily for example. A tool shop I visited in Melbourne this weekend running a sale and admitting to me that sales have been drying up - hence the promotion to entice customers. Never mind the drop in house prices of 11% in Melbourne and 15% in Sydney (and far more in localised areas) - it's the little things that are pointing to people tightening their belts, reducing their spending etc - by choice because they lack confidence or because they are struggling, I don't know.

    Anyone else noticing a slow-down in our economy on the ground? Or anyone themselves tightening their belt/spending habits recently because of a sense of impending tough times? Running a business and noticing a decline in work/sales?

    Just curious.

    Cheers,

    Dom

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  3. #2
    rrich Guest

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    Dom,
    Something similar went on here. It could be a problem if. . . .

    Someone buys a house that is pathetically beyond their means with a 5 year introductory interest rate. Their intent is to sell after 4½ years and buy another house. The assumption is that the house will appreciate more than real estate commissions and closing costs. If everything goes according to plan for the owner, there is no problem.

    HOWEVER

    In the real world, the housing market can remain static or prices can even fall. Or the job market can become stressed and people are terminated for lack of work reasons. When this happens the homeowner can be foreclosed mainly because the appreciation isn't in the house and they can't sell it. It's not a big deal if the lending agency forecloses on one house. When the lending agency has to foreclose on hundreds or thousands of houses the financial pressure becomes extreme on the lending agency and they find it necessary to restrict or even stop funding loans. When this happens, even very qualified buyers with significant percentages of down payment find it difficult to secure funding. Multiply this across many of the lending agencies and the problem is national.

    I've gone through this twice. Once when I was moving between cities and attempting to buy a new home. I didn't break even when selling the old home. Obtaining financing on the new home was purely H***. The second time, I was just a retired observer and kicking myself for not buying a second home out of town as a vacation home.

    As for the term "Consumer Confidence", I don't think that it is a meaningful term. I mean that when a consumer pulls a dollar out of their pocket and buys something, that is confidence. When a consumer doesn't have the dollar or doesn't want to spend that is no confidence. It is easy to measure the former but the latter is much more difficult to assess.

    To protect yourself and family, buy only what you need, make only payments that you are obligated and stuff the rest away where no one can touch it.

  4. #3
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    Default

    I think it often has nothing to do with the state of the economy but more how the media portrays it. You only need a couple of front page headlines to the effect of we are in for a boom or a bust and the crowds follow to fulfill their statement.
    Media has a lot to answer for with their reckless behaviour

  5. #4
    rrich Guest

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    And my friends, you don't have to deal with orange face and hair that is clueless. Today, his actions took about 10% off of my retirement savings. What a *^%$*^% idiot.

  6. #5
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    yep journalists no longer can be called investigative journalists the media are only interested with portraying subjects in a headline that pops.

  7. #6
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    Default

    As the AUD will fall as the economy tanks, seeing sales on overseas made tools is not something I’d expect much of...but I’m keeping an eye on the second hand market because I reckon when things are tight, people have to sell their expensive toys and liquidate their businesses.

    Just visit a mining town during a downturn, there are v8 utes, caravans and jetskis for sale on every street corner.

  8. #7
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    Default

    The reason I like playing with tools and wood in my shed is that for a few hours I don't have to think about the state things are in.
    Come on folks this is the woodwork forum. The happy place.
    Regards
    John

  9. #8
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    Default

    Possibly best then not to read this thread. It's contents are stated pretty clearly in the title.

    Australia's much celebrated run without a recession is based on the immigration ponzy scheme. For over a decade we have had the highest % rate of immigration in the oecd. It is easy to grow the economy just bring in ridiculous numbers of people. Underlying that though is static productivity and worse the economic stratification of our population, started by Hawke et al and continuing now. There are a few who are doing very well indeed but everywhere I look there are massive numbers of people barely keeping it together.

    rrich: Our housing market is like no other. Australia is almost exactly the same size as the cont 48 with a population of 23 million. Some ridiculous proportion, like 50% or something, of our total population is in 3 east coast capitals. We have the highest ratio of housing cost to wages in those 3 places of anywhere in the world. Right up there with hong kong, tokyo and london. There are reasons of course, lack of water, tropical disease, lack of job opportunities. The multiple is a consequence of the baby boomer generation. Our longer term history shows the anomaly is post ww2. When the BB die the housing stock will be released and I believe our market will realign with similar overseas developed countries, europe and most of the USA. We not only build bigger houses than americans but we put far fewer people in them.

    I have been thinking for about a year we would see a recession this winter, after the election, and it will be catastrophic. I further predict housing values across the country to fall to 2009 levels. But then what would I know ?
    I'm just a startled bunny in the headlights of life. L.J. Young.
    We live in a free country. We have freedom of choice. You can choose to agree with me, or you can choose to be wrong.
    Wait! No one told you your government was a sitcom?

  10. #9
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    Default

    My main focus for this post was whether others have noticed a pull-back in spending / confidence in yourselves or others, but general economic talk is also always interesting.

    Rrich, we don't really have introductory rate home loans here, but the equivalent for investors are interest only loans, which are now switching over to principal and interest in a lot of cases - raising the cost to service the loan by approx. 30% and catching many out from a cashflow perspective. Then due to tighter lending standards from the recent Royal Commission into banking, they are unable to refinance for a new interest only loan (especially if the properties have suffered capital losses recently). This is putting pressure on many.

    Our entire housing market is finally showing strong signs of falling apart - and I think it has a long way further to fall yet. In the USA your stockmarket is the major bubble, with older people pilling in to try and build a nest-egg for retirement in a hurry, even at record valuations, whereas here it's similar but with housing.

    Austin Turner - i agree that our dollar will fall (unless the US dollar collapses first) - even quicker if the Reserve starts quantitative easing and blows out the public debt to support the economy and housing bubble - or if the bubble bursts and they bail out the banks etc. So prices on new imported goods may not drop - although with the worldwide economy slowing I think that there may be oversupply pushing prices down for a while. Motor vehicle sales are down like 15% this year for example. But the second hand market should definitely see some bargains - and provided your own income and wealth doesn't collapse it may offet some opportunities, albeit at someone elses expense.

    Damian, I agree. I think we are in for a rough ride. The worst part is there isn't anywhere to really hide - cash is risky - low return and possibly inflated away if we run up the quantitative easing printing press, shares are overvalued, bonds are paying nearly zero, higher yield bonds are junk/risky, housing market is popping... where do you even put any savings. Maybe best to invest in tools!!!

    Cheers, Dom

  11. #10
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    Default

    Anyone else noticing a slow-down in our economy on the ground?
    Yep, sure have.

    I do a market stall and speak to a lot of the other stall holders. The story is more or less the same, nobody has any money to spend, unless you're practically giving your stuff away. I've also noticed an increase in the number of stall holders, I'm not sure that's a good sign either.

    At the Maleny Expo this year I spoke to a number of experienced stall holders and, again, the story was more or less the same. To be honest the lack of actual buyers was pretty noticeable.

    Whether it's a market or show the most obvious thing to me is that people are treating these events as more of a gallery/entertainment place rather than somewhere to actually buy something.

  12. #11
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    Default

    Great discussion, even on a woodies forum.

  13. #12
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    Default

    Hi,
    Another reason for less spending is saturation, when you already have all you need and even more so when you have all you want as well.
    Regards
    Hugh

    Enough is enough, more than enough is too much.

  14. #13
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    Default

    Quote Originally Posted by A Duke View Post
    Hi,
    Another reason for less spending is saturation, when you already have all you need and even more so when you have all you want as well.
    Regards
    Good point. True for the more affluent among us.
    But there are many in need have have not reached saturation ..... and wish they had or even will one day.

  15. #14
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    Default

    Another reason for less spending is saturation
    Yep, that is true indeed, however, saturation can be eliminated.

    The next time you hear of someone throwing out and looking to replace their busted ass low durability laminated MDF/Chipboard furniture/kitchen, send them in my direction and I'll hand make them a unique heirloom replacement from sustainable Australian timbers, saturation problem solved.


  16. #15
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    Default

    Quote Originally Posted by Feckit View Post
    Yep, sure have.

    I do a market stall and speak to a lot of the other stall holders. The story is more or less the same, nobody has any money to spend, unless you're practically giving your stuff away.

    At the Maleny Expo this year I spoke to a number of experienced stall holders and, again, the story was more or less the same. To be honest the lack of actual buyers was pretty noticeable.
    Yeah ok, that's the sort of info I was looking for, thanks. Not good though. I assume now would not be the optimal time to start a small woodworking based business.

    Cheers, Dom

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