Category: Debt

Determine how much debt you owe

For many people, the most important step is to figure out how much debt they have. Knowing how much you owe is a crucial aspect of dealing with the problem. You’ll need the most recent statements from all of your creditors to total up your debts (e.g. bank, mortgage provider, store cards, etc).

Make a budget

Budgeting is an effective strategy for taking control of your financial destiny. It assists you in budgeting so that you can cover the necessities while still having money left over to save. It can assist you in determining where your money goes, what you can afford, and ensuring debt repayment.

Recognize interest rates

Whether it’s a credit card, a personal loan, or a home loan, there are a variety of interest rates to choose from. Understanding how interest rates operate is critical to determining how much your repayments will be and if you will be able to afford them if they rise in the future.

When it comes to loans, there are several options to consider, such as fixed vs. variable interest rates, balance transfers, and overdrafts. It can be difficult to decipher the meanings of all of these varied phrases. Small variances in interest rates can add up to a lot of money over time, so shopping around for the best price will help you obtains the best deal.

Consolidation of debt

Debt consolidation is the process of combining all of your current debts into a single new debt. It can help you decrease the amount of interest and fees you spend on various loans while also making repayments easier. If you’re having trouble managing your obligations, paying someone to consolidate them all into one loan may seem like a good idea. However, there are a lot of things to be cautious of when it comes to debt consolidation, so be sure you know what you’re getting into before signing anything.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Several reasons have contributed to the rapid increase in housing debt in recent years, the most significant of which being that lower interest rates in Australia allow consumers to borrow more when taking out a home loan. This raises the average size of new loans, as well as the average amount of outstanding loans, over time.

 An rise in the availability of housing finance has exacerbated the effect of increased household borrowing capacity. These new lenders actively battled for market share by undercutting traditional lenders’ mortgage rates and offering innovative mortgage products such home equity loans, interest-only loans, and loans with minimal documentation. Between 1990 and 2003, strong demand for property from retail investors contributed significantly to the rise in home debt. The constant rapid growth in house values, mediocre returns in alternative asset classes such as shares, and advances in the financing and tax treatment of residential property lured retail investors to residential property.

The turmoil in global capital markets has had a major influence on Australia’s house finance industry. This is because deposits provide for just around half of total funding for Australian financial institutions, with the rest coming from domestic and international capital markets.

While the overall availability of housing finance appears to be unaffected, market share has shifted and mortgage rates have risen.

The turmoil in the financial markets has raised the cost of various sources of capital market borrowing and limited the availability of others, but it has had the greatest impact on securitisation markets.

Deregulation and financial innovation have considerably improved loan availability in the household sector. Furthermore, the economy’s continued robust performance has given households additional confidence in taking on debt. Household debt has increased dramatically, but household balance sheets remain in good health, with a strong growth in asset value offsetting the increase in debt.

Furthermore, the majority of the new debt is held by households that are well positioned to service it.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

According to the most recent OECD data, the ratio of Australian household debt to net disposable income is 217 percent, implying that the average household owes twice as much as it earns in a year. The Bank of International Settlements estimates Australian household debt to be 119 percent of GDP, second only to the Swiss. While the housing market is responsible for much of this debt, the situation for young people is more complicated. Many will be burdened by a constellation of personal credit arrangements — credit cards, overdrafts, payday loans, overdue bills, fines, and Afterpay-style agreements – since they are less likely to possess assets.

According to the Consumer Policy Research Centre, one out of every ten young people took out a personal loan in October, up from one out of every fifty in May, while one out of every five used more informal lines of credit, such as borrowing from family members.

Borrow only what you need

“I think this will have a major influence on people’s mental health, living with this financial insecurity over their heads,” says Gerard Brody of the Consumer Action Law Centre. As a result, a young person’s ability to hold down a job, see friends, and maintain their mental health is impacted. It influences all they do. “If we truly intended to achieve financial security, the first principle, the simple advice is: don’t borrow for necessities.”

“As a result, you have more young people struggling to make ends meet on a jobseeker stipend that is once again below the poverty line. Those who do not find work will face a worsening of the crisis.”

Since the global financial crisis of 2008, Australians have seen their earnings fall by 2% and have been forced to work in increasingly precarious and insecure occupations. The process of young people becoming self-sufficient adults has become more difficult over time. This has been going on for a long time, but some people also have access to their parents’ bank accounts.

When that person is finished, they may still require funds, so they seek out another loan. This has the potential to create a self-fulfilling cycle that makes life increasingly unfair for young people without financial resources.

 General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.               

Lowe also questioned the government’s wage-hike plan in a speech at the Australian Farm Institute conference in Toowoomba,  noting that pay packets were not increasing even in places where the labour market was tight. With 115,200 people joining the workforce in the preceding month, Australia’s unemployment rate fell to 5.1 percent in May, returning to pre-pandemic levels.

The unemployment rate has dropped 0.4 percentage points to 5.1 percent, which is currently 0.2 percentage points lower than the 5.3 percent recorded in March 2020.

Lowe said the surge in household borrowing that has accompanied the boom remained on the bank’s radar as Australian house values soar across the country, particularly in regional areas.

Lowe’s warning comes as the government tries to enact new legislation that would reverse the Gillard administration’s responsible lending standards, which the Treasurer, Josh Frydenberg, has claimed are required to aid the country’s economic recovery. The government has set a target of lowering the unemployment figure to below 5%, claiming that once competition for jobs exceeds this level, wage hikes will certainly follow.

The cause for this, according to Lowe, is that businesses operate in a highly competitive environment, encouraging companies to escalators “non-wage methods” rather than paying more for workers when faced with labour shortages.

Source:  theguardian.com

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

The paper, Housing: Taming the Elephant in the Economy, summarises the views of 87 Australian economists and other housing sector professionals on the economic effects of rising home prices. The authors of the paper suggest that this exposes a “ticking economic time bomb” if interest rates rise.

Furthermore, housing prices, which have risen 10% in the year to April, are expected to grow up to 14% in the following year, significantly putting homeowners out of reach for many. Professor Duncan Maclennan, the report’s principal author, stated that the present real estate market is broken on all levels and poses an associated risk to the Australian economy. The report also stated that Australia’s housing system fails young people, who are increasingly being priced out of the market.

Australia’s housing policy has exacerbated income and wealth disparities while also causing severe economic volatility. This is stifling productivity and distorting Australia’s capital-investment patterns.

To improve the housing system, the paper advises a new national housing policy at the Commonwealth level, as well as a permanent housing committee as part of the national cabinet. It also suggests that housing stimulus initiatives be redirected to help the social renting sector.

The authors of the report also advocated for housing market stability to be included in the Reserve Bank of Australia’s legal obligations in order to help preserve a more reasonable market.

Source: news.com.au

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Net debt is expected to reach $617.5 billion, or 30% of GDP, by June 2025, and then climb to $980.6 billion, or 40.9 percent of GDP. This is slightly less than the 2020-21 budget predictions.

In his budget speech, Treasurer Josh Frydenberg noted, “This is modest by worldwide standards. As a percentage of GDP, net debt is around half of what it is in the UK and the US, and less than a third of what it is in Japan. We are in a better position to deal with the approaching economic issues than practically any other country.”

The government had already promised to postpone the dreaded budget repair process until after the next federal election, promising no major cuts or austerity measures until the economy had recovered.

The economy will roar back to life, according to the Treasury, with GDP climbing three percentage points in a year, from 1.25 percent in 2020-21 to 4.25 percent in 2021-22. In the face of the pandemic, the Morrison government is quick to point out that Australia has performed better than most comparable countries. Australia’s economy shrunk by only 2.5 percent, instead of the projected 20% contraction.

The budget is estimated to have contributed to the development of more than 250,000 new jobs by the end of 2022-23. According to the administration, the unemployment rate will rise five times faster than it did during the 1990s recession.

Source:- News.com.au

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.