Australians have an unsustainable debt addiction, which will be hard to kick, and painful to recover from. A new report by CPD fellow Steve Keen has found that in just 18 months time we may be spending as much of the national income on interest payments as we were in 1990 – when interest rates were at 17 per cent.
Australia’s level of irresponsible lending isn’t as high as that which brought on the US subprime crisis, but because our debt to GDP ratio is growing so much faster the impact of any slowdown will be more severe here – and the pain will be much more widely spread.
In ‘Deeper in Debt: Australia’s addiction to borrowed money‘, Steve explains the dynamics of Australia’s debt addiction in clear and accessible language. The paper outlines the probable economic consequences of the end of the debt binge, offers advice on how to cope with the debt hangover, and proposes reforms to prevent it happening again.
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‘Deeper in Debt’ in the news
Steve Keen‘s CPD Occasional Paper struck a chord with media around the country. Steve’s messages are relevant wherever people have mortgages or credit cards, and he was in hot demand for interviews by newspapers and radio stations from Sydney’s CBD to the Northern Territory.
The Age’s Nassim Khadem described how Fondness for debt paves the way for a major recession and The Australian ran with ‘Mortgage debt ‘will reach crisis’‘. Channel 7, Channel 10, and the ABC’s ‘World Today’ program also covered the story, and Eureka St ran an editorial on the more personal side of how our Addiction to borrowed money will hurt us. Extracts from the paper were published in a special liftout on housing affordability in the Sydney Morning Herald on September 22.
Keen appeared on SBS TV on October 18, warning that Australia’s current economic boom won’t last – no matter who wins the next election:
“The reason we have a booming economy is half due to China, which is a
bonus from the outside, but the other half is due to the incredible
amount of money we’ve borrowed, and you can look wealthy while you’re spending borrowed money. The trouble is, ultimately, you have to pay it back, and I think we have gone past the point of no return in the amount of debt we’ve accumulated, so the good times could come to a very sudden end.”
Steve’s very happy to answer questions arising out of ‘Deeper in Debt’. Please post your question or comment below.
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Hard copies of ‘Deeper in Debt’ are available for $15 each including postage. Email contact(at)cpd.org.au to place your order.