http://www.crikey.com.au/2008/10/03/kohler-what-is-a-depression-and-are-we-headed-into-one/ now with extra source Sun, 12 Feb 2012 06:22:59 +0000 hourly 1 http://wordpress.org/?v=3.2.1 http://www.crikey.com.au/2008/10/03/kohler-what-is-a-depression-and-are-we-headed-into-one/#comment-20452 Andrew D Thu, 01 Jan 1970 10:00:00 +0000 #comment-20452 In determining where Australia will go, perhaps it is best to look at one macro long term trend. Our GDP is 70% driven by Consumer spending. Consumers have been having a whale of a time as our household debt to disposable income has climbed from 50 to 150% in the last 20 years – facilitated by retail banks and consumer finance companies through marketing “debt is good” and IT enablement “we can actually track all of you”.<br />Now we have reached the Consumer debt barrier. Let us assume that Consumer spending growth is zero than our GDP growth is down to 1% instead of 3%, and with a population growth of 1% that means zero GDP per capita growth for the foreseeable future.<br />An alternative, really dire, scenario is that 50% of all Consumers spending has been driven by GROWTH in debt. Take away the debt growth factor and 70 units become 35 units, with a total GDP of 65 units – a reduction of 35% in overall GDP. Let’s say a “depression” of 13% per annum for three years and then 10-15 years of a Japanese style sideways economy.<br />On that note, it is late Friday night and it’s time to go to the pub (the classic Aussie solution to most problems) and discuss Garnaut!! Haveagoodweekend.<br /> In determining where Australia will go, perhaps it is best to look at one macro long term trend. Our GDP is 70% driven by Consumer spending. Consumers have been having a whale of a time as our household debt to disposable income has climbed from 50 to 150% in the last 20 years – facilitated by retail banks and consumer finance companies through marketing “debt is good” and IT enablement “we can actually track all of you”.
Now we have reached the Consumer debt barrier. Let us assume that Consumer spending growth is zero than our GDP growth is down to 1% instead of 3%, and with a population growth of 1% that means zero GDP per capita growth for the foreseeable future.
An alternative, really dire, scenario is that 50% of all Consumers spending has been driven by GROWTH in debt. Take away the debt growth factor and 70 units become 35 units, with a total GDP of 65 units – a reduction of 35% in overall GDP. Let’s say a “depression” of 13% per annum for three years and then 10-15 years of a Japanese style sideways economy.
On that note, it is late Friday night and it’s time to go to the pub (the classic Aussie solution to most problems) and discuss Garnaut!! Haveagoodweekend.

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