DID YOU KNOW?

Money Magazine Australia - - WHAT IF? -

US house­holds far out­strip us in terms of “bad debt” or debt used to fund life­style such as cars and credit cards. Fin­der. com says non-hous­ing debt makes up more than 23% of US per­sonal debt com­pared with around 8% here.

BEST-CASE SCE­NARIO

Aus­tralia’s econ­omy needs to keep grow­ing to cush­ion the im­pact of fall­ing house prices and tighter bor­row­ing. There are pos­i­tive signs for the econ­omy in the non-con­sumer sec­tors that could help to off­set any fall in con­sumer spend­ing as debt is wound back.

WORST-CASE SCE­NARIO

The Mor­gan Stan­ley sce­nario as­sumes a 10%-15% fall in real house prices com­bined with a 20% re­duc­tion in debt lev­els. That 10%-15% fall in house prices is in line with many other fore­casts but there is ob­vi­ously a risk of big­ger falls.

THE WILD CARD

Aus­tralia re­mains vul­ner­a­ble to what hap­pens in the global econ­omy and fi­nan­cial mar­kets. Global debt has also been ris­ing so any shock to the global econ­omy could trig­ger wider prob­lems for bor­row­ers.

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