Last night Four Corners had a story called Debtland which looked at the rise in personal debt in this country. There are a number of points missed that could have added to the story which attracted 1.009 million viewers.
First up, it failed to recognise any of the information in last week’s Financial Stability Review from the Reserve Bank which clearly detailed up to date information on housing loans, personal loans and business loan arrears.
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The review pointed out and gave precise figures on the total number of housing mortgages past 30 days in arrears (and 90 days), which pointed out that NSW housing loans were larger because of the more costly houses and units in and around Sydney; and which suggested that non-bank originators and funders of mortgages were much quicker to put people into repossession than the banks.
The story neglected to point out that Australia as a whole has some $610 billion in net foreign debt, or around 56% of GDP. Our current account deficit is mostly driven by the cost of serving that debt; our banks are the biggest lenders and have been borrowing heavily offshore to finance the home, business and personal loan push. It should have made the point: what happens to that international debt (and the value of the Australian dollar) if housing and personal credit tanks? That’s a more frightening question than any asked in the story.
It also pointed out that Australian households had deposited an additional $28 billion with the banks since last July, which is in itself interesting because it shows most Australians trust the banks and not other forms of investment, such as the tanking stockmarket.
The story rightfully gave GE Money a serve but could have made GE money the entire story because of its dodgy lending practices and strongly US driven sales culture. It would have been handy to point out that GE Money has lost over $US1 billion in dodgy subprime mortgage lending and was an early casualty because its loans were among the worst.
The story thought neglected the most important point of all: the way the privacy laws have acted to prevent banks and other providers from cross checking credit and debt.
We have so-called negative credit reporting: not positive, which would enable the lender or credit provider to find out all the credit information of the potential customer. The combination of our privacy laws and the credit reporting and vetting system we have makes it much easier for people to access multiple credit accounts.
Finally, there was much talk about people losing their homes to repossessions in last night’s story. That was the most basic error of all. They are not their homes: they are the banks’ homes. Until you have paid off your debt to the bank or credit provider, they own it through the mortgage. You own the equity in the house if it sells for more than what you owe the bank.
Four Corners would have made a better report if that had been understood, if the differences between NSW and the rest of Australia had been examined; if the hard nosed lending and repossession practices of the likes of GE and other non bank credit providers, had been pursued.