“We’re growing wealthier and ever more indebted,” Tim Colebatch writes in The Age today.

His fellow Fairfax economics correspondent, Ross Gittins, touched on exactly the same subject yesterday:

I’ve always hoped the next recession, when it comes, will be a mild one. But Ian Macfarlane, recently retired Reserve Bank governor, thinks it will be deeper than last time because households are more financially exposed than ever before

[W]e’ve had the residential property boom to end all booms – including a welter of negative gearing – and left ourselves with one of the most highly indebted household sectors in the world.

So when something goes wrong, possibly a shock coming to us from the world economy, and households shift into balance sheet repair mode – that is, cut their spending so as to get on top of their debts – the landing is likely to be hard…

Labor’s then shadow finance spokesman, Bob McMullan, made valiant attempts to put the issue on the agenda in the lead up to the 2004 election.

And the ALP are trying to point out that since our housing debts are bigger, we’re paying greater proportions of our incomes to service our loans than in days of higher interest rates.

But will it become an issue? Will the crunch come? There’s still more steam in the resources boom and more big price increases for mineral exports to come, ABARE forecasts. Will that keep us going?

The government’s commodity advisor warns that infrastructure bottlenecks are preventing the resources sector from operating at full potential.

That, of course, is the cue for some frenzied finger pointing between the commonwealth and states over planning, coordination and who’s doing what with GST windfalls. It’s also the prompt for every community and consortium that thinks it deserves a go on the public tit to demand funding for their pet project.

So what is the political sleeper of 2007? Blogger Invig of Canberra has some well worded – if optimistic – thoughts to share:

Issues become important when politicians are able to convince the voter how it will affect their life.

The higher the complexity, the more difficult it is communicate the linkages.

The less accustomed the voters are to thinking in complex ways, the more time and effort is required to get the message across.

Thankfully, that effort is not wasted because once the voter is brought up to speed on the first complex issue, the newly-learnt thinking skills can be applied to other areas of policy.

If Rudd gets the ball rolling in educating the voters, he’ll get the jump on Howard – permanently.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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